USANA Health Sciences Announces Third Quarter 2009 Financial Results

    --  Net sales increase to $110.8 million
    --  Earnings per share increase to $0.51
    --  Company raises outlook for 2009

SALT LAKE CITY--(BUSINESS WIRE)-- USANA Health Sciences, Inc. (NASDAQ: USNA) today announced financial results for its fiscal third quarter, ended October 3, 2009.

Financial Performance

Net sales for the third quarter of 2009 improved to $110.8 million, compared with $107.2 million in the third quarter of the prior year, an increase of 3.3%. The year-over-year increase was due to an overall increase in product sales, driven primarily by an 8.2% increase in the number of active Associates. The negative effect of changes in currency exchange rates, on a year-over-year basis, reduced net sales in the third quarter by approximately $4.1 million. Net earnings for the third quarter were $7.9 million, or $0.51 per diluted share, compared with $8.1 million or $0.50 per diluted share in the third quarter of the prior year. The decrease in net earnings resulted from higher Associate incentives expense, partially offset by lower selling, general and administrative expenses and improved gross profit margins. The increase in earnings per share in third quarter of 2009 was due to a lower number of average shares outstanding.

Dave Wentz, chief executive officer, said, "We are pleased to report another quarter of solid operating results. The two compensation plan enhancements that we introduced last year continue to drive our growth in sales and Associates. We recognize that offering a rewarding compensation plan that attracts and retains talented entrepreneurs is central to our long-term objectives of generating top-line growth and returning value to our shareholders. While Associate incentive expense has initially increased due to our compensation plan enhancements, we expect that it will decrease as a percentage of sales over the next several quarters. Additionally, we will continue to closely manage our SG&A costs and expect further improvements in our gross profit margins."

For the nine months ended October 3, 2009, net sales increased by 0.7% to $320.2 million, compared with $318.0 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. This increase was largely offset by the negative effect of changes in currency exchange rates versus the prior year, which reduced net sales by approximately $23.6 million. Excluding the impact of currency fluctuations, net sales for the first nine months of 2009 would have been $343.8 million, a year-over-year increase of 8.1%. Net earnings for the first nine months of 2009 were $23.3 million, or $1.51 per diluted share, compared with net earnings of $25.5 million, or $1.56 per diluted share for the first nine months of the prior year. Unfavorable currency exchange rates and higher Associate incentives expense were the primary cause for lower net earnings and earnings per share. These decreases, however, were partially offset by lower selling, general and administrative expenses and a lower number of average shares outstanding.

Regional Results

During the third quarter of 2009, net sales in North America decreased by 6.7%, or $4.3 million, to $60.3 million, compared with the third quarter of the prior year. This decline was primarily the result of the negative effect of changes in currency exchange rates, which decreased net sales in this region by $2.5 million. Additionally, sales in the U.S. decreased by 5.2% and local currency sales in Canada decreased by 3.8%. In Mexico, however, local currency sales increased by 14.9% compared with the third quarter of 2008. Active Associates in the North America region decreased by 1.0% to 102,000, compared with the third quarter of the prior year.

"North America continues to be the region most affected by the difficult economic conditions," continued Wentz. "Additionally, our third quarter sales tend to be softer in North America, as many of our Associates slow their business activities during the summer vacation months. We continue to implement new initiatives, including targeted marketing campaigns, to keep our customers in this region consistently purchasing our products and our Associates actively building their home-based business."

Net sales in the Asia Pacific region for the third quarter of 2009 increased by 18.5% to $50.5 million, compared with the third quarter of the prior year. Excluding the negative effect of a stronger U.S. dollar, net sales in this region increased during the quarter by 22.3%. This improvement was due to an overall increase in product sales, driven by 19.8% growth in the number of active Associates and, to a lesser extent, higher product prices. Active associates in this region grew to a record 97,000, compared with 81,000 for the third quarter of the prior year. This increase in the number of active Associates was due primarily to double-digit growth in Hong Kong, Malaysia, and South Korea. Additionally, the Company's newest market, the Philippines, added 6,000 Associates.

"Momentum in our Asia Pacific region continues to build with record sales and Associate counts. Our balanced approach of providing best-in-class products, coupled with a rewarding compensation plan, continues to drive our record results in this region. Furthermore, we are pleased with the success of our 17th annual International Convention, which we held in Salt Lake City during August. This exciting event was highlighted by new product announcements and several renowned speakers, including Larry King. In light of our solid operating results and the success of our Convention, we look forward to continued success for the balance of 2009 and anticipate carrying positive momentum into 2010," concluded Wentz.

Outlook

Jeff Yates, chief financial officer, said, "Following another solid quarter, we are raising our financial guidance for 2009. Accordingly, we are projecting consolidated net sales for 2009 to be between $431 million and $434 million. We are also raising our earnings per share guidance for 2009 and now estimate that EPS will be between $2.07 and $2.10."

"We are pleased with the performance of the business in this difficult economic environment and remain confident that our business model and operating efficiencies will give us a distinct advantage in our industry. We are firmly committed to increasing the number of Associates and customers and look forward to completing what we believe will be yet another record year for sales at USANA."

Conference Call

USANA will hold a conference call and webcast to discuss this announcement with investors on Wednesday, October 28, 2009 at 11:00 a.m. Eastern Time. Investors may listen to the call by accessing USANA's website at http://www.usanahealthsciences.com.

About USANA

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 Philippines, the Netherlands and the United Kingdom. More information on USANA can be found at http://www.usanahealthsciences.com.

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)

(Unaudited)

                                               Quarter Ended

                                               27-Sept-08(1)  3-Oct-09

Net sales                                      $ 107,176      $ 110,764

Cost of sales                                    22,228         22,637

  Gross profit                                   84,948         88,127

Operating expenses

 Associate incentives                            44,573         50,799

 Selling, general and administrative             27,621         25,414

  Earnings from operations                       12,754         11,914

Other income (expense)                           (489    )      110

  Earnings before income taxes                   12,265         12,024

Income taxes                                     4,185          4,112

NET EARNINGS                                   $ 8,080        $ 7,912

Earnings per share - diluted                   $ 0.50         $ 0.51

Weighted average shares outstanding - diluted    16,133         15,547

(1) All amounts reflective of adjustments made due to the restatement of
previously reported amounts

USANA Health Sciences, Inc.

Consolidated Balance Sheets

(In thousands)

                                               As of          As of

                                               3-Jan-09       3-Oct-09

                                                              (Unaudited)

ASSETS

Current Assets

Cash and cash equivalents                      $ 13,281       $ 13,265

Inventories                                      23,879         25,615

Other current assets                             15,514         11,465

Total current assets                             52,674         50,345

Property and equipment, net                      57,369         57,289

Goodwill                                         5,690          5,690

Other assets                                     6,839          8,150

Total assets                                   $ 122,572      $ 121,474

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

Accounts payable                               $ 6,879        $ 5,628

Other current liabilities                        47,655         34,259

Total current liabilities                        54,534         39,887

Line of credit                                   34,990         17,000

Other long-term liabilities                      1,212          1,743

Stockholders' equity                             31,836         62,844

Total liabilities and stockholders' equity     $ 122,572      $ 121,474




  USANA Health Sciences, Inc.

  Sales by Region

  (Unaudited)

  (In thousands)

                          Quarter Ended

                          27-Sep-08           3-Oct-09

  Region

  North America

  United States           $ 40,169   37.5  %  $ 38,098   34.4  %

  Canada                    18,216   17.0  %    16,661   15.0  %

  Mexico                    6,208    5.8   %    5,535    5.0   %

  North America Total       64,593   60.3  %    60,294   54.4  %

  Asia Pacific

  Southeast Asia/Pacific    23,265   21.7  %    25,227   22.8  %

  East Asia                 15,206   14.2  %    20,262   18.3  %

  North Asia                4,112    3.8   %    4,981    4.5   %

  Asia Pacific Total        42,583   39.7  %    50,470   45.6  %

  Consolidated            $ 107,176  100.0 %  $ 110,764  100.0 %

  Active Associates by Region(1)

  (Unaudited)

                          As of

                          27-Sep-08           3-Oct-09

  Region

  North America

  United States             61,000   33.2  %    61,000   30.7  %

  Canada                    28,000   15.2  %    26,000   13.1  %

  Mexico                    14,000   7.6   %    15,000   7.5   %

  North America Total       103,000  56.0  %    102,000  51.3  %

  Asia Pacific

  Southeast Asia/Pacific    42,000   22.8  %    49,000   24.6  %

  East Asia                 32,000   17.4  %    40,000   20.1  %

  North Asia                7,000    3.8   %    8,000    4.0   %

  Asia Pacific Total        81,000   44.0  %    97,000   48.7  %

  Total                     184,000  100.0 %    199,000  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)

  (Unaudited)

                          As of

                          27-Sep-08           3-Oct-09

  Region

  North America

  United States             45,000   61.7  %    40,000   58.8  %

  Canada                    16,000   21.9  %    15,000   22.1  %

  Mexico                    3,000    4.1   %    3,000    4.4   %

  North America Total       64,000   87.7  %    58,000   85.3  %

  Asia Pacific

  Southeast Asia/Pacific    8,000    10.9  %    8,000    11.7  %

  East Asia                 1,000    1.4   %    1,000    1.5   %

  North Asia                -        0.0   %    1,000    1.5   %

  Asia Pacific Total        9,000    12.3  %    10,000   14.7  %

  Total                     73,000   100.0 %    68,000   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.