USANA Sales Increase 12.4% to Record $126 Million

USANA Health Sciences, Inc. (USNA 39.65, +0.25, +0.63%) has announced record financial results for its fiscal second quarter ended July 3, 2010.

Financial Performance

Net sales in the second quarter of 2010 improved 12.4% to $126.0 million, compared with $112.1 million in the second quarter of the prior year. This increase was due to an overall increase in product sales, driven primarily by a 5% increase in the number of active Associates, which is the result of continued growth in the Asia Pacific region. Additionally, favorable changes in currency exchange rates accounted for $5.2 million of the increase in net sales for the second quarter of 2010.

Net earnings in the second quarter of 2010 increased 22.5% to $10.8 million, or $0.69 per share, compared with $8.8 million, or $0.57 per share, in the second quarter of the prior year. This year-over-year increase resulted from higher net sales and improved gross profit margins. These improvements, however, were partially offset by higher Associate incentives expenses and higher selling, general and administrative expenses.

For the six months ended July 3, 2010, net sales increased by 17.1% to $245.1 million, compared with $209.4 million for the first six months of the prior year. This growth in sales was due to an overall increase in product sales, driven again by a higher average number of active Associates. Additionally, favorable changes in currency exchange rates accounted for $13.9 million of the increase in net sales for the first six months of 2010. Net earnings for the first six months of 2010 increased by 32.2% to $20.4 million, or $1.31 per diluted share, compared with net earnings of $15.4 million, or $1.00 per diluted share, for the first six months of the prior year. This increase in net earnings during the period resulted from higher net sales, improved gross profit margins, and lower relative selling, general and administrative expenses, which were partially offset by higher Associate incentives expenses.

Regional Results

During the second quarter of 2010, net sales in the North America region decreased by 1.0% to $62.1 million, compared with the second quarter of the prior year. Net sales in North America benefited by $2.4 million from changes in currency exchange rates in Canada and Mexico. Active Associates in the North America region decreased by 10.4% compared with the second quarter of the prior year. Importantly, on a sequential quarter basis, active Associates increased by 1.1% and sales increased by 2.6% in this region.

Net sales in the Asia Pacific region for the second quarter of 2010 increased by 29.5% to $63.9 million, compared with the second quarter of the prior year. This improvement was mainly due to an overall increase in product sales, driven by 22.3% growth in the number of active Associates. This increase in the number of active Associates was primarily the result of double-digit growth in Hong Kong.

"Although our results in North America were down slightly over last year, we are pleased to see consecutive quarter improvements in this region in both sales and active Associates," said Dave Wentz, chief executive officer. "The success of our Asia Pacific region continues to drive our top-line growth. This success was highlighted this quarter by our Asia Pacific convention held in May in Hong Kong, which was our largest ever Associate-attended event. At this event, we introduced several new region-specific products that contributed to record convention sales of $2.8 million. Highlighting this convention was the announcement of our intention to open business in China. We believe that now is the right time for USANA to make the necessary investments for entry into this large and growing market."

Outlook

Jeff Yates, chief financial officer, said, "I am pleased with our strong second quarter operating results which were better than we expected, particularly the 160 basis-point improvement we made to our operating margin. While the Asia Pacific convention in May added about $1.6 million in SG&A spending, this was more than offset by the significant improvement to our gross margin. In light of our strong second quarter operating results, we are raising our financial guidance for 2010. We now project consolidated net sales to be between $488 million and $495 million and earnings per share to be between $2.73 and $2.80."

Conference Call

USANA will hold a conference call and webcast to discuss this announcement with investors on Wednesday, July 28, 2010 at 11:00AM 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 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. 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
                                                             ------------------------------
                                                               4-Jul-09        3-Jul-10
                                                             ------------- ----------------
 Net sales                                                      $ 112,093    $ 126,011
 Cost of sales                                                     23,753       22,735
                                                                  -------      -------
                          Gross profit                             88,340      103,276
 Operating expenses
             Associate incentives                                  50,321       57,065
             Selling, general and administrative                   24,719       29,149
                                                                  -------      -------
                          Earnings from operations                 13,300       17,062
 Other income (expense)                                               125         (587 )
                                                                  -------      ------- ---
                          Earnings before income taxes             13,425       16,475
 Income taxes                                                       4,634        5,705
                                                                  -------      -------
 NET EARNINGS                                                   $   8,791    $  10,770
                                                             ==== =======  === =======
 Earnings per share - diluted                                   $    0.57    $    0.69
                                                             ==== =======  === =======
 Weighted average shares outstanding - diluted                     15,385       15,697
                                                                  =======      =======
                                USANA Health Sciences, Inc.
                                Consolidated Balance Sheets
                                      (In thousands)
                                                                 As of           As of
                                                               2-Jan-10        3-Jul-10
                                                             ------------- ----------------
                                                                              (Unaudited)
ASSETS
Current Assets
  Cash and cash equivalents                                     $  13,658    $  28,427
  Inventories                                                      25,761       30,789
  Other current assets                                             12,507       11,910
                                                                  -------      -------
     Total current assets                                          51,926       71,126
Property and equipment, net                                        57,241       56,035
Goodwill                                                            5,690        5,690
Other assets                                                        8,581       10,821
                                                                  -------      -------
     Total assets                                               $ 123,438    $ 143,672
                                                             ==== =======  === =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
  Accounts payable                                              $   5,810    $   7,121
  Other current liabilities                                        34,668       36,523
                                                                  -------      -------
     Total current liabilities                                     40,478       43,644
Line of credit                                                      7,000            -
Other long-term liabilities                                         1,587        1,470
Stockholders' equity                                               74,373       98,558
                                                                  -------      -------
     Total liabilities and stockholders' equity                 $ 123,438    $ 143,672
                                                             ==== =======  === =======
 

 

 

                     USANA Health Sciences, Inc.
                           Sales by Region
                             (Unaudited)
                           (In thousands)
                                         Quarter Ended
                          -------------------------------------------
                                4-Jul-09              3-Jul-10
                          --------------------- ---------------------
Region
------------------------
North America
  United States            $  39,908   35.6 %    $  37,992   30.1 %
  Canada                      16,454   14.7 %       18,373   14.6 %
  Mexico                       6,379    5.7 %        5,748    4.6 %
                             -------  ----- --     -------  ----- --
North America Total           62,741   56.0 %       62,113   49.3 %
Asia Pacific
  Southeast Asia/Pacific      24,518   21.9 %       23,968   19.0 %
  East Asia                   19,649   17.5 %       34,437   27.3 %
  North Asia                   5,185    4.6 %        5,493    4.4 %
                             -------  ----- --     -------  ----- --
Asia Pacific Total            49,352   44.0 %       63,898   50.7 %
                             -------  ----- --     -------  ----- --
Consolidated               $ 112,093  100.0 %    $ 126,011  100.0 %
                          == =======  ===== ==  == =======  ===== ==
                   Active Associates by Region (1)
                             (Unaudited)
                                             As of
                          -------------------------------------------
                                4-Jul-09              3-Jul-10
                          --------------------- ---------------------
Region
------------------------
North America
  United States               65,000   32.5 %       57,000   27.1 %
  Canada                      26,000   13.0 %       26,000   12.4 %
  Mexico                      15,000    7.5 %       12,000    5.7 %
                             -------  ----- --     -------  ----- --
North America Total          106,000   53.0 %       95,000   45.2 %
Asia Pacific
  Southeast Asia/Pacific      46,000   23.0 %       44,000   21.0 %
  East Asia                   40,000   20.0 %       63,000   30.0 %
  North Asia                   8,000    4.0 %        8,000    3.8 %
                             -------  ----- --     -------  ----- --
Asia Pacific Total            94,000   47.0 %      115,000   54.8 %
Total                        200,000  100.0 %      210,000  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
                          ---------------------------------------
                               4-Jul-09             3-Jul-10
                          ------------------   ------------------
Region
------------------------
North America
  United States           42,000    60.9 %     39,000    59.1 %
  Canada                  15,000    21.7 %     15,000    22.7 %
  Mexico                   3,000     4.3 %      3,000     4.6 %
                          ------   ----- --    ------   ----- --
North America Total       60,000    86.9 %     57,000    86.4 %
Asia Pacific
  Southeast Asia/Pacific   7,000    10.1 %      6,000     9.1 %
  East Asia                1,000     1.5 %      2,000     3.0 %
  North Asia               1,000     1.5 %      1,000     1.5 %
                          ------   ----- --    ------   ----- --
Asia Pacific Total         9,000    13.1 %      9,000    13.6 %
Total                     69,000   100.0 %     66,000   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.

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