USANA Reports Q2 Results

SALT LAKE CITY, Jul 18, 2006 (BUSINESS WIRE) -- USANA Health Sciences Inc. (USNA) today announced record net sales for the fiscal second quarter of 2006 (ended July 1). Consolidated net sales in the second quarter of 2006 increased 14.5% to $93.9 million, compared with $82.0 million in the second quarter of the prior year. This is the highest level of quarterly sales recorded in the company's history. Net sales growth for the second quarter of 2006 was driven primarily by a 13.6% increase in the number of Active Associates, compared with the second quarter of the prior year.

Financial Performance
Earnings from operations in the second quarter of 2006 grew 4.1% to $15.4 million, or 16.4% of net sales, compared with $14.7 million, or 18.0% of net sales, in the second quarter of the prior year. Earnings from operations in the second quarter of 2006 were reduced by $1.2 million due to the required expensing of equity-based compensation. The company achieved net earnings in the second quarter of 2006 of $10.3 million, an increase of 8.4%, compared with net earnings of $9.5 million in the second quarter of the prior year. Excluding the expense of equity-based compensation, this increase in net earnings would have been 17.0%. Earnings per share in the second quarter of 2006 improved to $0.55 per share, an increase of 14.6%, compared with $0.48 per share in the second quarter of the prior year. Excluding the expense of equity-based compensation, this increase in earnings per share would have been 22.9%.

During the second quarter of 2006, the company's estimated tax rate was adjusted on a year-to-date basis to 34.8%, which is lower than the 35.5% tax rate that the company had previously forecasted for the full year. This lower tax rate increased earnings per share in the quarter by approximately $0.01. During the second quarter, the company, through its share buyback program, purchased and retired approximately 800,000 shares with an investment of $30.1 million. Approximately $10.7 million remains available under the current share buyback authorization.

For the six-month period ended July 1, 2006, consolidated net sales were $183.6 million, an increase of 15.7%, compared with $158.6 million in the first six months of 2005. Earnings from operations for the first six months of 2006 were $29.9 million, an increase of 5.5%, compared with $28.3 million for the same period in 2005. Earnings from operations for the first six months of 2006 were reduced by $2.2 million due to the required expensing of equity-based compensation. The company achieved net earnings in the first six months of 2006 of $19.9 million, an increase of 7.8%, compared with net earnings of $18.5 million in the first six months of 2005. Excluding the expense of equity-based compensation, this increase in net earnings would have been 15.9%. Earnings per share increased 11.8% in the first six months of 2006 to $1.04, compared with $0.93 in the first six months of 2005. Excluding the expense of equity-based compensation, this increase in earnings per share would have been 20.4%.

"We are pleased with our strong sales results which continue to be driven by our consistent growth of Active Associates," said Dave Wentz, president of USANA. "In North America, second quarter sales grew by 19%, compared with last year. We believe this growth in our most mature region reflects the continued interest in our products and the business opportunity that USANA offers its Associates. The engagement and effort of our Associate leaders in North America has been one of the driving forces behind this success. Additionally, interest in our low-glycemic, macro optimizer products remained strong and was a growth driver in the second quarter, as this product group reached 14.1% of product sales."

Regional Results
Net sales in North America, the company's most mature region, increased 19.0%, compared with the second quarter of 2005. Excluding the positive impact of currency fluctuations, this sales increase would have been 15.8%. This growth was driven by particularly strong sales in the United States, the company's largest market, and in Canada. Sales during the second quarter were up 20.4% in the United States, and up 17.8% in Canada, compared with the second quarter of last year. Mexico also aided the growth in this region, improving 11.8% over the second quarter of last year. The number of Active Associates in North America increased 16.9% to 90,000, compared with 77,000 in the second quarter of 2005.

In the Pacific Rim region, net sales improved 4.8% over the second quarter of last year. Excluding the negative impact of currency fluctuations, this sales increase would have been 7.7%. This increase was primarily attributable to growth in the Australia-New Zealand market, which was up 9.3%, and in South Korea, which was up 33.2%, over the second quarter of last year. The number of Active Associates in the Pacific Rim region increased 8.3% to 52,000, compared with 48,000 in the second quarter of 2005. "During the second quarter, we achieved 8.5% sequential quarterly sales growth in the Pacific Rim, which was the strongest increase achieved in that region in the last four quarters," continued Wentz. "We remain very optimistic about our growth prospects in this region, as we continue to focus on providing science-based products and a unique home-based business opportunity."

Outlook
The company continues to wait for government approval for its business license in its planned new market. Due to the uncertainty of obtaining this license, the company has decided to remove any potential revenue in that market from its 2006 guidance.

"We are updating our full year guidance and issuing third quarter guidance, neither of which includes any sales from our planned new market," said Gilbert A. Fuller, executive vice president and chief financial officer. "Accordingly, we expect net sales in the third quarter of 2006 to be in the range of $94 million to $96 million, compared with $82.2 million in the third quarter of last year, a growth rate of 14% to 17%. We expect earnings per share in the third quarter of 2006 to be between $0.55 and $0.57, including the adjustment for expensing of equity-based compensation, a growth rate of 8% to 12%. Excluding the expensing of equity-based compensation, we expect earnings per share in the third quarter of 2006 to be between $0.60 and $0.62, a growth rate of 18% to 22%.

"For the full year 2006," continued Fuller, "excluding entry into a new market, we now believe that net sales growth will range between 15% and 17%, compared with 2005. Additionally, we expect earnings per share growth for the full year 2006 to be between 17% and 20%, excluding the impact of expensing equity-based compensation. We expect equity-based compensation to decrease our earnings per share for the full year 2006 by approximately $0.18. This earnings per share estimate also assumes a tax rate for 2006 of 34.8%, compared with the 33.7% tax rate for 2005. While we are disappointed that the opening of our new market has taken longer than planned, we are pleased with our ability to continue to generate strong growth in our existing markets. We continue to believe that we are well-positioned to capitalize on excellent long-term growth opportunities, both in new and existing markets," concluded Fuller.

About USANA
USANA develops and manufactures high-quality nutritionals, 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, 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. 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, 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.

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