USANA Health Sciences Announces First Quarter 2008 Financial Results


USANA Health Sciences, Inc. (NASDAQ: USNA) today announced its financial results for the fiscal first quarter, ended March 29, 2008. These results approximated the preliminary results for the first quarter, which the company announced on March 27, 2008.

Financial Performance

Net sales for the first quarter of 2008 increased by 0.9% to $101.6 million, compared with $100.7 million in the first quarter of the prior year. This modest growth in net sales for the first quarter of 2008 resulted primarily from the benefits associated with stronger foreign currencies, offset by a decrease in the number of active Associates in North America.

Earnings per share from continuing operations were $0.46 per share, compared with $0.64 per share in the first quarter of 2007. This decrease in earnings per share for the quarter was due to higher overall operating costs.

The lower growth in net sales during the first quarter was affected by disappointing results from new promotional activities, by macro-economic uncertainties in the U.S., and by the lingering effects of negative misinformation about the company that appeared in the mass media during 2007. The increase in operating costs included higher Associate incentives, higher overall wage expenses from an increase in human resources, higher costs associated with our regional events and the Asia Pacific Convention, higher accounting and legal expenses, and higher marketing costs, including an important investment in market research which the company believes will have a positive future return.

    Regional Results

    North America Region

During the first quarter of 2008, net sales in North America decreased by 3.5% to $62.3 million, compared with the first quarter of the prior year. Excluding changes in foreign currency, net sales decreased by 7.8%. This year-over-year decrease was mainly due to lower-than-expected sales in the U.S., which declined by 8.3%. Additionally, the number of Active Associates in North America decreased by 2.1%, solely due to a decline in the U.S.

Asia Pacific Regions

During the first quarter, net sales in the Asia Pacific regions increased by 8.8% to $39.3 million, compared with the first quarter of 2007. Excluding changes in foreign currency, net sales increased by 1.0%. This growth in the Asia Pacific regions was primarily attributable to a 48.8% increase in Hong Kong and 43.8% increase in Malaysia. These increases were partially offset by a 16.3% decline in Taiwan and an 18.0% decline in Singapore, compared with first quarter 2007. The number of Active Associates in these regions increased by 9.5%, compared with the first quarter of the prior year.

"Our first quarter financial results were disappointing," said the company's president, Dave Wentz. "Unfortunately, new promotional activities during the first quarter did not increase sales, as we had anticipated.

"The management team is committed to growing sales, and we are taking the necessary actions to make this happen," continued Wentz. "In the short-term, we have implemented a promotion to increase customers and drive sales. Additionally, we are using the results of our market research to develop new and exciting ways for our Associates to grow their business, including unique product development and package design, as well as the enhancement of sales tools. Most importantly, we are refocusing on our partnership with Associate leaders and looking at new initiatives that will reward the Associates who are actively building their businesses."


Today, the company is providing financial guidance for the second quarter of 2008 and is reiterating its guidance for the full-year 2008. The company believes that net sales for the second quarter of 2008 will be between $103 million and $106 million, with earnings per share between $0.48 and $0.51. As announced on March 27, 2008, the company believes that, for the full-year 2008, net sales could increase by approximately 2% and that earnings per share could decline by as much as 20%, compared with the full-year 2007.

Gilbert A. Fuller, the company's executive vice president and chief financial officer, said, "We are optimistic that our renewed focus on proven incentive programs, along with our development of Associate leaders, will increase sales. Operationally, our business model is strong, and we will continue to control costs and leverage our recent investments in human and capital resources."

Conference Call

USANA will hold a conference call and webcast to discuss this announcement with investors on Monday, April 21, 2008 at 5:00 PM 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 Preferred Customers and Associates throughout the United States, Canada, Australia, New Zealand, Hong Kong, Japan, Taiwan, South Korea, Singapore, Mexico, Malaysia, the Netherlands, and the United Kingdom. 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. Forward-looking statements in the foregoing press release include, but are not necessarily limited to, references to the expected outcome of initiatives and promotions planned by the company, guidance given for future operating periods, and the company's belief regarding the future effect of incentive programs on the top-line and on operating costs. Our actual results could differ materially from those projected in these forward-looking statements, which involve a number of risks and uncertainties, including 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 (Unaudited)
                (In thousands, except per share data)

                                                 Quarter Ended
                                           31-Mar-07       29-Mar-08
                                         --------------  -------------

 Net sales                               $     100,678   $    101,570
 Cost of sales                                  20,586         21,502
                                         --------------  -------------
    Gross profit                                80,092         80,068

 Operating expenses
  Associate incentives                          39,549         41,364
  Selling, general and administrative           21,501         25,774
  Research and development                         930            973
                                         --------------  -------------

    Earnings from operations                    18,112         11,957

 Other income                                      471            (71)
                                         --------------  -------------
    Earnings from continuing operations
     before income taxes                        18,583         11,886

 Income taxes                                    6,783          4,339
                                         --------------  -------------

   Income from continuing operations            11,800          7,547

 Income (Loss) from discontinued
  operations                                      (114)             -
                                         --------------  -------------

 NET EARNINGS                            $      11,686   $      7,547
                                         ==============  =============

 Earnings per share - diluted
   Continuing operations                 $        0.64   $       0.46
   Discontinued operations               $       (0.01)  $          -
                                         --------------  -------------
   Net Earnings                          $        0.63   $       0.46
                                         ==============  =============
 Weighted average shares outstanding -
  diluted                                       18,463         16,459
                                         ==============  =============
                     USANA Health Sciences, Inc.
               Consolidated Balance Sheets (Unaudited)
                            (in thousands)

                                              As of          As of
                                            29-Dec-07      29-Mar-08
                                          -------------   ------------

Current Assets
 Cash and cash equivalents                $      12,865   $     17,566
 Inventories                                     19,439         21,080
 Other current assets                            13,688         12,060
                                          -------------   ------------
    Total current assets                         45,992         50,706

Property and equipment, net                      52,061         55,888
 Goodwill                                         5,690          5,690
 Other assets                                     5,385          5,732
                                          -------------   ------------
    Total assets                          $     109,128   $    118,016
                                          =============   ============

Current liabilities
 Accounts payable                         $       8,111   $      7,932
 Other current liabilities                       32,074         29,654
                                          -------------   ------------
    Total current liabilities                    40,185         37,586

Line of Credit                                   28,000         28,000
Other long-term liabilities                       2,305          2,728
Stockholders' equity                             38,638         49,702
                                          -------------   ------------
    Total liabilities and stockholders'
     equity                               $     109,128   $    118,016
                                          =============   ============
                     USANA Health Sciences, Inc.
                           Sales by Region
                            (in thousands)

                                           Quarter Ended
                                   31-Mar-07            29-Mar-08
                             ---------------------  ------------------
                                  (Unaudited)          (Unaudited)
  North America              $    64,553     64.1%  $  62,275    61.3%

  Southeast Asia/Pacific          20,633     20.5%     21,545    21.2%

  East Asia                       11,885     11.8%     13,615    13.4%

  North Asia                       3,607      3.6%      4,135     4.1%
                             -----------  --------  ---------  -------

  Consolidated               $   100,678    100.0%  $ 101,570   100.0%
                             ===========  ========  =========  =======
                   Active Associates by Region (1)

                                                 As of
                                     31-Mar-07           29-Mar-08
                                 ------------------  -----------------
                                    (Unaudited)         (Unaudited)
  North America                     97,000    60.6%    95,000    57.9%

  Southeast Asia/Pacific            34,000    21.3%    37,000    22.6%

  East Asia                         23,000    14.3%    26,000    15.8%

  North Asia                         6,000     3.8%     6,000     3.7%
                                 ---------  -------  --------  -------
  Total                            160,000   100.0%   164,000   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 from USANA
    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
                                        31-Mar-07         29-Mar-08
                                    -----------------  ---------------
                                       (Unaudited)       (Unaudited)
  North America                       72,000    90.0%   69,000   89.6%

  Southeast Asia/Pacific               6,000     7.4%    6,000    7.8%

  East Asia                            1,000     1.3%    1,000    1.3%

  North Asia                           1,000     1.3%    1,000    1.3%
                                    --------  -------  -------  ------
  Total                               80,000   100.0%   77,000  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 from USANA at any time during the most
    recent three-month period.

Source: USANA Health Sciences, Inc.