USNA USANA Health Sciences

USANA Health Sciences, Inc. (NYSE: USNA) today announced record financial results for its fiscal third quarter ended September 29, 2012.

Financial Performance

Net sales for the third quarter of 2012 increased by 15.1% to $165.2 million, compared with $143.5 million in the prior-year period. The growth in net sales was driven by increases in both the Company’s Asia Pacific and North America/Europe regions. Changes in currency exchange rates reduced net sales by nearly $1.0 million.

Net earnings for the third quarter increased to $17.5 million, an increase of 41.2%, compared with the prior-year period. This increase was due primarily to higher net sales, lower relative Associate incentive expense, and a meaningfully lower effective tax rate of 28.2% for the quarter. Earnings per share for the quarter increased by 45.7% to $1.18, compared with $0.81 in the third quarter of the prior year. This improvement in earnings per share can be attributed to higher net earnings and a lower number of diluted shares outstanding, which resulted from the Company’s share repurchases over the last 12 months. Total diluted common shares outstanding as of September 29, 2012 were 14,884, as compared with 15,205 as of October 1, 2011.

“We believe USANA’s exceptional results this quarter are largely due to the strategies we set into place during 2011 and the first part of 2012, which have combined to generate strong momentum for USANA,” said Mr. Dave Wentz, Chief Executive Officer. “A highlight of the quarter was our 20th anniversary celebration at our International Convention in Salt Lake City, where we had record attendance and record sales. A significant part of our convention was the unveiling of our personalization strategy, which focuses on our customers and their experience with us. As part of this strategy, we announced MyHealthPak’s availability in our Asia Pacific region and the launch of new tools and applications designed to help our Associates customize USANA’s products for their customers. Personalization and customization are key components of our long-term strategy to grow our business and deliver value to both our customers and shareholders.”

Regional Results

Net sales in the Asia Pacific region increased by 21.6% to $102.7 million, compared with $84.5 million for the third quarter of the prior year. This improvement was due to strong sales growth in Southeast Asia/Pacific and Greater China. This sales growth was driven by a 21.6% increase in the number of active Associates in Asia Pacific, as well as price increases in certain markets that were implemented in the first quarter. Active Associate growth was driven by double-digit growth in Greater China and Southeast Asia and, to a lesser extent, the addition of Thailand to the region.

“We are successfully executing our strategy in the Asia Pacific region,” continued Mr. Wentz. “We reported local currency sales growth in nearly all of our Asia Pacific markets and double-digit growth in Greater China and Southeast Asia. We are encouraged by the sales and customer growth in Greater China this quarter, a region that represents a meaningful growth opportunity for USANA in the future. Consequently, growing Greater China is one of the pillars of our worldwide strategy.”

During the third quarter of 2012, net sales in the North America/Europe region increased by 5.9% to $62.5 million, compared with $59.0 million in the prior-year period. The number of Active Associates in North America/Europe declined modestly, compared with the third quarter of 2011.

Mr. Wentz added, “Sales in our North America region, which continues to show indications of improvement, were aided by record Convention sales in the U.S. and a market-specific promotion in Mexico. Additionally, we see Associate productivity improving in this region. As we continue to execute our growth strategy in this region, we remain optimistic that it will continue to grow in the foreseeable future.”

The Company maintained its successful track record of generating meaningful levels of cash from operations and ended the quarter with approximately $77 million in cash and cash equivalents. Cash generated from operations totaled $19.7 million for the quarter. During the quarter, the Company invested $8.9 million to repurchase 200,000 shares of the Company’s stock.

Outlook

The Company provided the following updated financial outlook for 2012:

• Consolidated net sales approaching $645 million, versus the previous outlook of between $630 million and $640 million.
• Earnings per share between $4.35 and $4.40, versus the previous outlook of between $4.10 and $4.20.

Chief Financial Officer Doug Hekking commented, “In light of our strong third-quarter performance, and the current momentum we are seeing in the business, we are updating our financial outlook for the remainder of the year. Actual results and our updated forecast for the year would make 2012 USANA’s tenth consecutive year of record sales.”

Conference Call

USANA will hold a conference call and webcast to discuss this announcement with investors on Wednesday, October 24, 2012 at 11:00 AM 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, China, Japan, Taiwan, South Korea, Singapore, Mexico, Malaysia, the Philippines, the Netherlands, the United Kingdom, Thailand, France and Belgium. 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 Nine Months Ended 1-Oct-11 29-Sep-12 1-Oct-11 29-Sep-12     Net sales $ 143,501 $ 165,175 $ 435,992 $ 480,196 Cost of sales   25,202   30,343   77,072   85,633 Gross profit 118,299 134,832 358,920 394,563   Operating expenses Associate incentives 66,158 70,406 198,725 209,316 Selling, general and administrative   33,365   40,342   103,038   115,150   Earnings from operations 18,776 24,084 57,157 70,097   Other income (expense)   133   267   234   177 Earnings before income taxes 18,909 24,351 57,391 70,274   Income taxes   6,524   6,861   19,800   22,288   NET EARNINGS $ 12,385 $ 17,490 $ 37,591 $ 47,986           Earnings per share - diluted $ 0.81 $ 1.18 $ 2.39 $ 3.19 Weighted average shares outstanding - diluted   15,205   14,884   15,712   15,064               USANA Health Sciences, Inc. Consolidated Balance Sheets (In thousands) (Unaudited) As of As of 31-Dec-11 29-Sep-12   ASSETS Current Assets Cash and cash equivalents $ 50,353 $ 76,601 Inventories 36,968 33,296 Other current assets   18,738   28,754 Total current assets 106,059 138,651   Property and equipment, net 60,754 62,052 Goodwill 17,740 17,797 Intangible assets, net 42,637 42,022 Deferred income taxes 11,033 6,705 Other assets   6,273   7,057 Total assets $ 244,496 $ 274,284     LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable $ 7,952 $ 6,906 Other current liabilities   51,744   59,881 Total current liabilities 59,696 66,787     Other long-term liabilities 942 946 Deferred income taxes 9,948 9,571 Stockholders' equity   173,910   196,980 Total liabilities and stockholders' equity $ 244,496 $ 274,284       USANA Health Sciences, Inc. Sales by Region (Unaudited) (In thousands)                     Quarter Ended 1-Oct-11 29-Sep-12

Region

  North America / Europe $ 59,028 41.1 % $ 62,490 37.8 %   Asia Pacific   Southeast Asia/Pacific 30,117 21.0 % 35,709 21.6 %   Greater China 47,012 32.8 % 59,722 36.2 %   North Asia   7,344 5.1 %   7,254 4.4 %   Asia Pacific Total   84,473 58.9 %   102,685 62.2 %   Total $ 143,501 100.0 % $ 165,175 100.0 %     Active Associates by Region (1) (Unaudited)   As of 1-Oct-11 29-Sep-12

Region

  North America / Europe 80,000 37.4 % 79,000 32.6 %   Asia Pacific   Southeast Asia/Pacific 47,000 22.0 % 58,000 24.0 %   Greater China 78,000 36.4 % 97,000 40.1 %   North Asia   9,000 4.2 %   8,000 3.3 %   Asia Pacific Total   134,000 62.6 %   163,000 67.4 %   Total   214,000 100.0 %   242,000 100.0 %       (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 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 1-Oct-11 29-Sep-12

Region

  North America / Europe 51,000 77.3 % 52,000 81.2 %   Asia Pacific   Southeast Asia/Pacific 7,000 10.6 % 6,000 9.4 %   Greater China 7,000 10.6 % 5,000 7.8 %   North Asia 1,000 1.5 % 1,000 1.6 %   Asia Pacific Total 15,000 22.7 % 12,000 18.8 %   Total 66,000 100.0 % 64,000 100.0 %       (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 at any time during the most recent three-month period.