UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)
x		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 1, 2006
OR
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                           to
Commission file number: 0-21116

USANA HEALTH SCIENCES, INC.
(Exact name of registrant as specified in its charter)

3838 West Parkway Blvd., Salt Lake City, Utah 84120
(Address of principal executive offices, Zip Code)

(801) 954-7100
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x     No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.  (Check one):

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  o     No  x

The number of shares outstanding of the registrant’s common stock as of August 3, 2006 was 17,803,855.

USANA HEALTH SCIENCES, INC.

FORM 10-Q

For the Quarterly Period Ended July 1, 2006

INDEX

		PART I.   FINANCIAL INFORMATION
Item 1		Financial Statements
		Consolidated Balance Sheets
		Consolidated Statements of Earnings—Quarter Ended
		Consolidated Statements of Earnings—Six Months Ended
		Consolidated Statement of Stockholders’ Equity and Comprehensive Income
		Consolidated Statements of Cash Flows
		Notes to Consolidated Financial Statements
Item 2		Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3		Quantitative and Qualitative Disclosures About Market Risk
Item 4		Controls and Procedures
		PART II.   OTHER INFORMATION
Item 1A		Risk Factors
Item 2		Unregistered Sales of Equity Securities and Use of Proceeds
Item 4		Submission of Matters to a Vote of Security Holders
Item 6		Exhibits
Signatures

 

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PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

USANA HEALTH SCIENCES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands)

		December 31,			July 1,
		2005			2006
					(unaudited)
ASSETS
Current assets
Cash and cash equivalents		$	10,579		$	9,173
Inventories		22,223			20,458
Prepaid expenses and other current assets		6,024			6,048
Deferred income taxes		3,004			2,532
Total current assets		41,830			38,211
Property and equipment, net		23,302			23,777
Goodwill		5,690			5,690
Other assets		2,886			2,612
		$	73,708		$	70,290
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable		$	4,955		$	6,303
Other current liabilities		21,601			24,479
Total current liabilities		26,556			30,782
Long-term liabilities		1,414			69
Stockholders’ equity
Common stock, $0.001 par value; authorized 50,000 shares, issued and outstanding 18,343 as of December 31, 2005 and 17,723 as of July 1, 2006		18			18
Additional paid-in capital		9,161			7,420
Retained earnings		35,720			31,211
Accumulated other comprehensive income		839			790
Total stockholders’ equity		45,738			39,439
		$	73,708		$	70,290

 

The accompanying notes are an integral part of these statements.

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USANA HEALTH SCIENCES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

(in thousands, except per share data)

(unaudited)

		Quarter Ended
		July 2,			July 1,
		2005			2006
Net sales		$	82,015		$	93,911
Cost of sales		19,499			22,276
Gross profit		62,516			71,635
Operating expenses:
Associate incentives		31,911			37,454
Selling, general and administrative		15,168			17,991
Research and development		689			830
Total operating expenses		47,768			56,275
Earnings from operations		14,748			15,360
Other income (expense):
Interest income		93			169
Interest expense		(3		)	(10		)
Other, net		(157		)	177
Other income (expense), net		(67		)	336
Earnings before income taxes		14,681			15,696
Income taxes		5,138			5,352
Net earnings		$	9,543		$	10,344
Earnings per common share
Basic		$	0.50		$	0.57
Diluted		$	0.48		$	0.55
Weighted average common shares outstanding
Basic		18,948			18,149
Diluted		19,821			18,777

 

The accompanying notes are an integral part of these statements.

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USANA HEALTH SCIENCES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

(in thousands, except per share data)

(unaudited)

 

		Six Months Ended
		July 2,			July 1,
		2005			2006
Net sales		$	158,593		$	183,562
Cost of sales		37,509			43,614
Gross profit		121,084			139,948
Operating expenses:
Associate incentives		61,461			72,882
Selling, general and administrative		30,017			35,617
Research and development		1,288			1,562
Total operating expenses		92,766			110,061
Earnings from operations		28,318			29,887
Other income (expense):
Interest income		197			311
Interest expense		(3		)	(10		)
Other, net		(96		)	330
Other income, net		98			631
Earnings before income taxes		28,416			30,518
Income taxes		9,945			10,614
Net earnings		$	18,471		$	19,904
Earnings per common share
Basic		$	0.97		$	1.09
Diluted		$	0.93		$	1.05
Weighted average common shares outstanding
Basic		19,008			18,304
Diluted		19,896			19,002

 

The accompanying notes are an integral part of these statements.

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USANA HEALTH SCIENCES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME

Six Months Ended July 2, 2005 and July 1, 2006

(in thousands)

(unaudited)

													Accumulated
							Additional						Other
		Common Stock					Paid-in			Retained			Comprehensive
		Shares		Value			Capital			Earnings			Income (Loss)			Total
For the Six Months Ended July 2, 2005
Balance at January 1, 2005		18,953		$	19		$	11,853		$	34,496		$	1,475		$	47,843
Comprehensive income
Net earnings		—		—			—			18,471			—			18,471
Foreign currency translation adjustment, net		—		—			—			—			(740		)	(740		)
Comprehensive income																17,731
Common stock retired		(353	)	—			(3,948		)	(11,053		)	—			(15,001		)
Common stock issued under equity-based award plan, including tax benefit of $2,679		216		—			4,230			—			—			4,230
Balance at July 2, 2005		18,816		$	19		$	12,135		$	41,914		$	735		$	54,803
For the Six Months Ended July 1, 2006
Balance at December 31, 2005		18,343		$	18		$	9,161		$	35,720		$	839		$	45,738
Comprehensive income
Net earnings		—		—			—			19,904			—			19,904
Foreign currency translation adjustment, net		—		—			—			—			(49		)	(49		)
Comprehensive income																19,855
Common stock retired		(801	)	—			(5,733		)	(24,413		)	—			(30,146		)
Equity-based compensation expense		—		—			2,152			—			—			2,152
Common stock issued under equity-based award plan, including tax benefit of $1,033		181		—			1,840			—			—			1,840
Balance at July 1, 2006		17,723		$	18		$	7,420		$	31,211		$	790		$	39,439

 

The accompanying notes are an integral part of these statements.

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USANA HEALTH SCIENCES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

		Six Months Ended
		July 2, 2005			July 1, 2006
Increase (decrease) in cash and cash equivalents
Cash flows from operating activities
Net earnings		$	18,471		$	19,904
Adjustments to reconcile net earnings to net cash provided by operating activities
Depreciation and amortization		2,824			2,924
Loss on sale of property and equipment		5			8
Equity-based compensation expense		—			2,152
Excess tax benefit from equity-based payment arrangements		—			(832		)
Deferred income taxes		56			(721		)
Allowance for inventory valuation		43			1,690
Changes in operating assets and liabilities:
Inventories		(4,545		)	340
Prepaid expenses and other assets		(734		)	(411		)
Accounts payable		(261		)	1,379
Other current liabilities		6,105			3,805
Total adjustments		3,493			10,334
Net cash provided by operating activities		21,964			30,238
Cash flows from investing activities
Proceeds from the sale of property and equipment		4			—
Purchases of property and equipment		(2,688		)	(3,104		)
Net cash used in investing activities		(2,684		)	(3,104		)
Cash flows from financing activities
Proceeds from exercise of equity-based awards		1,551			807
Excess tax benefit from equity-based payment arrangements		—			832
Redemption of common stock		(15,001		)	(30,146		)
Net cash used in financing activities		(13,450		)	(28,507		)
Effect of exchange rate changes on cash and cash equivalents		(469		)	(33		)
Net increase (decrease) in cash and cash equivalents		5,361			(1,406		)
Cash and cash equivalents, beginning of period		15,067			10,579
Cash and cash equivalents, end of period		$	20,428		$	9,173
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest		$	3		$	8
Income taxes		5,944			10,491

 

The accompanying notes are an integral part of these statements.

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USANA HEALTH SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)

Basis of Presentation

The unaudited interim consolidated financial information of USANA Health Sciences, Inc. and Subsidiaries (the “Company” or “USANA”) has been prepared in accordance with Article 10 of Regulation S-X promulgated by the Securities and Exchange Commission.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations.  In the opinion of management, the accompanying interim consolidated financial information contains all adjustments, consisting of normal recurring adjustments, necessary to present fairly the Company’s financial position as of July 1, 2006, and results of operations for the quarters and six months ended July 2, 2005 and July 1, 2006.  These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005.  The results of operations for the quarter and six months ended July 1, 2006 may not be indicative of the results that may be expected for the fiscal year ending December 30, 2006.

Recently Issued Accounting Standards

In June 2006, the FASB issued FIN No. 48, Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109 (“FIN 48”), which clarifies the accounting for uncertainty in income tax positions. FIN 48 defines the threshold for recognizing tax return positions in the financial statements as “more likely than not” that the position is sustainable, based on its technical merits. FIN 48 also provides guidance on the measurement, classification and disclosure of tax return positions in the financial statements. FIN 48 is effective for the first reporting period beginning after December 15, 2006, with the cumulative effect of the change in accounting principle recorded as an adjustment to the beginning balance of retained earnings in the period of adoption. The Company is currently evaluating the impact of adopting FIN 48 on its consolidated financial statements.

NOTE A—EQUITY-BASED COMPENSATION

Effective January 1, 2006, the Company adopted the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123(R), “Share-Based Payment,” using the modified version of prospective application.  Under this method, compensation expense includes the estimated fair value of equity awards vested during the reported periods.  Expense for equity awards vested is determined based on grant date fair value previously calculated for pro forma disclosures under SFAS No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosure—An Amendment of FASB Statement No. 123.”  Equity-based compensation expense recognized for the quarter and six months ended July 1, 2006 was comprised as follows:

		Quarter Ended July 1, 2006			Six Months Ended July 1, 2006
Cost of sales		$	143		$	270
Selling, general and administrative		930			1,637
Research and development		132			245
		$	1,205		$	2,152

 

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The impact of equity-based compensation expense on net earnings and earnings per share for the quarter and six months ended July 1, 2006, can be found in the pro forma table in this footnote.  The Company currently estimates that equity-based compensation expense will reduce basic and diluted earnings per share in 2006 by $0.18.  The following table shows remaining unrecognized compensation expense on a pre-tax basis related to all types of nonvested equity awards outstanding as of July 1, 2006.  This table does not include an estimate for future grants that may be issued.

 

The cost above is expected to be recognized over a weighted-average period of 2.4 years.

Prior to the adoption of SFAS No. 123(R), the Company presented all tax benefits resulting from equity-based compensation as cash flows from operating activities in the condensed consolidated statements of cash flows.  SFAS No. 123(R) requires cash flows resulting from tax deductions in excess of the grant-date fair value of equity awards to be included in cash flows from financing activities.  The excess tax benefits of $832 related to equity-based compensation included in cash flows from financing activities in the first six months of 2006 would have been included in cash flows from operating activities if the Company had not adopted SFAS No. 123(R).

As permitted by SFAS No. 148, prior to the adoption of SFAS No. 123(R) the Company accounted for equity award expense under the recognition and measurement principles of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” under which no compensation was recognized in the Company’s financial statements for the quarter and six months ended July 2, 2005.  In connection with the modified prospective method, disclosures made for periods prior to the adoption of SFAS No. 123(R) do not reflect restated amounts.

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The following table presents equity-based compensation expense included in our financial statements for the quarter and six months ended July 1, 2006, and also illustrates the pro forma effects on net earnings and earnings per share as if the Company had applied the fair value recognition provisions of SFAS No. 123, as amended by SFAS No. 148, to equity-based compensation for the quarter and six months ended July 2, 2005:

				Quarter Ended						Six Months Ended
				July 2, 2005			July 1, 2006			July 2, 2005			July 1, 2006
Net earnings		As reported		$	9,543		$	10,344		$	18,471		$	19,904
Add: Compensation cost included in reported net income				—			819			—			1,504
Deduct: Total compensation expense under the fair value method for all awards				(466		)	(819		)	(914		)	(1,504		)
Net earnings		Pro forma		$	9,077		$	10,344		$	17,557		$	19,904
Earnings per share—basic		As reported		$	0.50		$	0.57		$	0.97		$	1.09
		Pro forma		$	0.48		$	0.57		$	0.92		$	1.09
Earnings per share—diluted		As reported		$	0.48		$	0.55		$	0.93		$	1.05
		Pro forma		$	0.46		$	0.55		$	0.88		$	1.05

The Company’s 2006 Equity Incentive Award Plan (2006 Plan), which was approved by the shareholders at the Annual Shareholders’ Meeting held on April 19, 2006, allows for the grant of various equity awards including stock options, stock-settled stock appreciation rights, deferred stock units, and other types of equity-based awards to the Company’s officers, key employees, and non-employee directors.  Prior to the approval of the 2006 Plan, the Company maintained the 2002 Stock Option Plan (2002 Plan), which was limited to the granting of incentive and non-qualified stock options.  Between January 1, 2006, and April 19, 2006, the Company issued 175 stock options under the 2002 Plan.  Options granted under the 2002 Plan generally vest 20% each year on the anniversary of the grant date and expire five to ten years from the date of grant.  The 2006 Plan replaces the 2002 Plan for all future grants, and no new awards will be granted under the 2002 Plan.  The 2006 Plan authorized 5,000 shares of common stock for issuance, of which 4,704 shares were available for future issuance as of July 1, 2006.  Of the 296 shares granted under the 2006 Plan, 290 were stock-settled stock appreciation rights, 3 were stock options, and 3 were deferred stock units.  The Company’s Compensation Committee has initially determined that awards to be granted to officers and key employees under the 2006 Plan will generally vest 20% each year on the anniversary of the grant date and expire five to five and one-half years from the date of grant.  Awards of stock options and stock-settled stock appreciation rights to be granted to non-employee directors will generally vest 25% each quarter commencing on the last day of the fiscal quarter in which the awards are granted, and will expire five years from the date of grant.  Awards of deferred stock units are full-value shares at the date of grant, vesting in connection with service period, and do not have expiration dates.

The Company continues to use the Black-Scholes option pricing model to estimate fair value of equity awards, which requires the input of highly subjective assumptions, including the expected stock price volatility.  Prior to the implementation of SFAS No. 123(R), expected volatility represented the historical share prices of the Company’s common stock over the expected life of the award and the risk-free interest rate was based on the U.S. Treasury yield curve on the date of grant with respect to the expected life of the award.  Expected life was based on the contractual term of the award.

Preceding the adoption of SFAS No. 123(R), the Company engaged a third-party valuation expert to analyze assumptions used by the Company and to determine changes necessary for a more accurate reflection of the estimated fair value of equity

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awards granted by the Company.  Based on this analysis the Company decided that, effective January 1, 2006, expected volatility will be calculated by averaging the historical volatility of the Company and a peer group index.  The risk-free interest rate will continue to be based on the U.S. Treasury yield curve on the date of grant with respect to the expected life of the award.  Also, effective January 1, 2006, due to the “plain vanilla” characteristics of the Company’s stock options, the simplified method, as permitted by the guidance provided in Staff Accounting Bulletin No. 107, will be used to determine expected life while permitted.  We estimate that the equity-based compensation expense included in earnings before income taxes for the six months ended July 1, 2006 was decreased by approximately $128 due to the above mentioned change in assumptions used to estimate fair value of awards granted during the six months ended July 1, 2006.

The following table includes weighted-average assumptions used to calculate the fair value of awards granted during the periods indicated, as well as the weighted-average fair value of awards granted.  Deferred stock units are full-value shares at the date of grant and have been excluded from the table below.

		Quarter Ended						Six Months Ended
		July 2, 2005			July 1 2006			July 2 2005			July 1 2006
Expected volatility		72.00		%	57.04		%	72.00		%	57.04		%
Risk-free interest rate		3.87		%	4.98		%	3.87		%	4.79		%
Expected life		5.25 yrs.			4.125 yrs.			5.25 yrs.			4.125 yrs.
Expected dividend yield		0.00		%	0.00		%	0.00		%	0.00		%
Weighted-average fair value of awards granted		$	26.84		$	18.59		$	26.84		$	18.80

The weighted-average fair value and grant price of the 3 deferred stock units granted during the quarter and six months ended July 1, 2006 was $37.60.

A summary of the Company’s stock option and stock-settled stock appreciation right activity for the six months ended July 1, 2006 is as follows:

		Shares		Weighted- average Exercise  Price*			Weighted-average Remaining  Contractual Term		Aggregate Intrinsic Value**
Outstanding at December 31, 2005		1,773		$	17.43		6.97		$	37,121
Granted		468		$	38.14		—		$	—
Exercised		(181	)	$	4.47		—		$	—
Canceled or expired		—		$	—		—		$	—
Outstanding at July 1, 2006		2,060		$	23.26		6.05		$	31,186
Exercisable at July 1, 2006		589		$	26.16		7.69		$	7,472

*                    All awards are granted at the market value on the date of grant, which is established by averaging the closing price of the Company’s common stock over the five trading days preceding the date of grant.

**             Aggregate intrinsic value is defined as the difference between the current market value and the exercise price of awards that were in-the-money, and is estimated using the closing price of the Company’s common stock on the last trading day of periods ended as of the dates indicated.

Total intrinsic value of awards exercised, which includes stock options and stock-settled stock appreciation rights, during the six month periods ending July 2, 2005 and July 1, 2006, was $7,284 and $6,348, respectively.

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A summary of the Company’s deferred stock unit activity for the six months ended July 1, 2006 is as follows:

 

The total fair value of awards vested during the six month periods ending July 2, 2005 and July 1, 2006, which includes stock options, stock-settled stock appreciation rights, and deferred stock units, was $2,383 and $2,561, respectively.

NOTE B—INVENTORIES

Inventories consist of the following:

NOTE C—PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consist of the following:

 

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NOTE D—PROPERTY AND EQUIPMENT

Cost of property and equipment and their estimated useful lives is as follows:

		Years		December 31, 2005			July 1, 2006
Building		40		$	10,377		$	10,347
Laboratory and production equipment		5-7		9,706			10,231
Sound and video library		5		600			600
Computer equipment and software		3-5		23,083			23,549
Furniture and fixtures		3-5		2,654			2,669
Automobiles		3-5		248			221
Leasehold improvements		3-5		2,709			2,742
Land improvements		15		931			931
				50,308			51,290
Less accumulated depreciation and amortization				29,605			31,814
				20,703			19,476
Land				2,064			2,066
Deposits and projects in process				535			2,235
				$	23,302		$	23,777

 

NOTE E—GOODWILL

Goodwill represents the excess of the purchase price paid for acquired entities over the fair market value of the net assets acquired.  As of July 1, 2006, goodwill totaled $5,690, comprising $4,267 that was associated with the July 1, 2003 acquisition of Wasatch Product Development, Inc. (WPD) and $1,423 that was associated with the February 1, 2004 acquisition of FMG.  No events have occurred subsequent to either acquisition that have resulted in an impairment of the original goodwill amounts initially recorded from the transactions.  In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets,” goodwill must be tested at least annually and if the carrying amount of goodwill exceeds its fair value, an impairment loss must be recognized in an amount equal to that excess.

There were no changes in the carrying amount of goodwill for the acquired subsidiaries for the six months ended July 1, 2006:

 

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NOTE F—OTHER CURRENT LIABILITIES

Other current liabilities consist of the following:

 

NOTE G—COMMON STOCK AND EARNINGS PER SHARE

Basic earnings per share are based on the weighted average number of shares outstanding for each period.  Weighted-average shares issued and weighted-average shares redeemed during the periods indicated have been included in the calculation of weighted-average shares outstanding for basic earnings per share.  Diluted earnings per common share are based on shares outstanding (computed under basic EPS) and potentially dilutive shares.  Shares included in diluted earnings per share calculations include stock options granted that are in the money but have not yet been exercised.

 

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Options to purchase 571 shares of stock were not included in the computation of EPS for the quarter ended July 1, 2006 due to their exercise price being greater than the average market price of the shares. 

 

Options to purchase 319 shares of stock were not included in the computation of EPS for the six months ended July 1, 2006 due to their exercise price being greater than the average market price of the shares.

During the six months ended July 2, 2005, and July 1, 2006, the Company expended $15,001, and $30,146 to purchase 353 and 801 shares, respectively, under the Company’s share repurchase plan.  The purchase of shares under this plan reduces the number of shares issued and outstanding.

NOTE H—SEGMENT INFORMATION

The Company’s operations are distinguished by regions served and method of distribution employed.  Two reportable business segments are recognized by the Company: Direct Selling and Contract Manufacturing.  These operating segments are evaluated regularly by management in determining the allocation of resources and in assessing the performance of the Company.  Management evaluates performance based on net sales and the amount of operating income or loss.  Segment profit or loss is based on profit or loss from operations before income taxes.  All intercompany transactions, intercompany profit, currency gains and losses, interest income and expense, and income taxes are excluded in the Company’s determination of segment profit or loss.

Direct Selling

The Company’s Direct Selling segment develops, manufactures, and distributes nutritional, weight management, and personal care products, and is the primary segment in which the Company operates.  Products are distributed through a network marketing system using independent distributors referred to as “Associates.”  Products are also sold directly to “Preferred Customers,” who purchase products for personal use and are not permitted to resell or distribute the products.

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Selected financial information for the Direct Selling segment is reported for two geographic regions: North America and Pacific Rim.  North America includes the United States, Canada, and Mexico.  All other entities outside of North America are located within the Pacific Rim region, which includes Australia-New Zealand, Hong Kong, Japan, Taiwan, South Korea, and Singapore.

The profitability of each reported region within the Direct Selling segment is representative of what is controllable within that region by local management and is not necessarily indicative of actual profit or loss generated by a fully burdened region.  However, the presentation of the data is consistent with how management evaluates each region and the respective markets within that region.

Contract Manufacturing

Operating activities for the Contract Manufacturing segment primarily exist for the production of the Company’s Sensé™ line of skin and personal care products.  In addition to the production of the Sensé product line, contract manufacturing services are provided to a limited number of external customers.  This segment includes operations located in Draper, Utah and at a facility in Tianjin, China, which the Company acquired in October 2005.  Manufacturing and packaging activities for the Company’s Sensé products began at the Draper, Utah facility during the fourth quarter of 2003.  In the second quarters of 2005 and 2006, we had one and two external customers, respectively, that accounted for more than ten percent of segment sales.

Financial information summarized by operating segment and geographic region for the quarters ended July 2, 2005 and July 1, 2006 is listed below:

 

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