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USANA Health Sciences Announces First Quarter 2014 Financial Results

  USANA Health Sciences Announces First Quarter 2014 Financial Results    *First quarter net sales of $182.4 million; EPS of $1.15   *Company provides updated 2014 net sales and earnings outlook   *Share Repurchase Authorization increased to $200 million  Business Wire  SALT LAKE CITY -- April 29, 2014  USANA Health Sciences, Inc. (NYSE: USNA) today announced financial results for its fiscal first quarter ended March 29, 2014. The Company also updated net sales and earnings guidance for 2014.  Financial Performance  For the first quarter of 2014, net sales increased by 7.9% to $182.4 million, compared with $169.1 million in the prior-year period. The increase in net sales was driven by overall customer growth of more than 16.0%, which was largely due to the initiatives implemented by the Company in 2013. Net sales growth, however, was negatively impacted by unfavorable changes in currency exchange rates, which reduced net sales for the quarter by $5.0 million, as approximately 80% of the Company’s sales are outside of the U.S. The challenging media and regulatory environment that emerged in China during the quarter also negatively impacted net sales.  Net earnings for the first quarter were $16.5 million, a 7.0% decrease, compared with the prior-year period. This decrease resulted primarily from higher Associate Incentives expense due to the pricing and compensation plan initiatives implemented in 2013. Earnings per share for the quarter decreased 10.2% to $1.15, compared with $1.28 in the first quarter of the prior year. This decrease was attributed to lower net earnings and a higher number of diluted shares outstanding. Weighted average diluted shares outstanding were 14.4 million in the first quarter of 2014, compared with 13.9 million in the prior-year period. Additionally, the Company ended the quarter debt-free.  “Our business generated solid results in the first quarter, as evidenced by our double-digit growth in customers, world-wide unit volume and auto order volume,” said Dave Wentz, USANA’s Chief Executive Officer. “Growth in each of these indicators is important to our business, but customer growth is our highest priority and it is encouraging to see this metric accelerate as a result of our 2013 initiatives. While these initiatives are producing the intended effect on customer growth, they have also created some pressure on our operating margin through lower gross margins and higher Associate Incentives expense, which we anticipated. Additionally, an unfavorable shift in currency exchange rates and the challenging environment that emerged in China pressured our financial performance for the quarter. I’m pleased with USANA’s performance in light of these factors.”  Regional Results  Net sales in the Asia Pacific region increased by 13.0% to $118.6 million, compared with $104.9 million for the first quarter of the prior year. This improvement was due primarily to sales growth in the Greater China and Southeast Asia Pacific regions with China, Singapore and the Philippines experiencing the most meaningful growth. The Greater China region generated net sales growth in excess of 12% on a year-over-year basis. However, quarterly sequential sales for this region declined 1.1% due to the normal seasonality of the Chinese New Year, as well as the negative media and regulatory focus on businesses in the Company’s industry during the quarter.  Net sales in the Americas/Europe region were essentially flat at $63.8 million, compared with $64.1 million in the prior-year period, due primarily to a net sales decline in the U.S., which was partially offset by net sales growth in other markets in the region.  “As we anticipated, our business in several markets experienced the customary seasonal pressure of the Chinese New Year,” continued Mr. Wentz. “Additionally, the challenging environment that emerged in China during the quarter impacted our sales and customer growth in that market. Although we believe that the environment in China will continue to impact our short-term performance in that market, we remain confident in our growth opportunity in China and will continue to invest and build a sustainable business there. We also remain confident in the underlying strength of our world-wide business, and we expect the initiatives we put in place during 2013 will continue to drive long-term growth for the Company,” concluded Mr. Wentz.  Increased Share Repurchase Authorization  The Board of Directors has authorized up to $200 million in funding for share repurchases by the Company of its outstanding common stock. This authorization is inclusive of the approximately $13.6 million that was remaining under the prior authorization as of the end of the first quarter of 2014. Repurchases may be made from time to time, in the open market, through block trades or otherwise. The number of shares to be purchased and the timing of purchases will be based on market conditions, the level of cash balances, general business opportunities, and other factors.  Outlook  The Company provided the following updated financial outlook for 2014:    *Consolidated net sales between $770 million and $790 million, versus the     previous outlook of between $790 million and $810 million   *Earnings per share between $5.50 and $5.65, versus the previous outlook of     between $5.80 and $5.95  Chief Financial Officer, Paul Jones, commented, “Although our first quarter results were impacted by a number of factors, we continue to expect our financial performance to accelerate as the year progresses. The pricing and Associate compensation plan initiatives we implemented in 2013, however, will continue to create a challenging year-over-year comparable for our financial performance. Additionally, we anticipate that the environment in China will continue to impact our growth in 2014 and have adjusted our outlook accordingly. We remain committed to growing our business in China and will continue to invest in this important market as part of our growth strategy. We will also continue to advance our personalization strategy around the world and leverage the initiatives we implemented during 2013 to drive long-term growth for the Company.”  Conference Call  USANA will hold a conference call and webcast to discuss this announcement with investors on Wednesday, April 30, 2014 at 11:00 AM Eastern Time. Investors may listen to the call by accessing USANA’s website at  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, Belgium and Colombia. More information on USANA can be found at  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                                                     30-Mar-13       29-Mar-14                                                                      Net sales                                           $ 169,082       $ 182,401 Cost of sales                                        30,261        33,828             Gross profit                              138,821         148,573                                                                      Operating expenses      Associate incentives                             69,855          78,874      Selling, general and administrative             42,404        44,577                                                                                  Earnings from operations                  26,562          25,122                                                                      Other income (expense)                               (26     )      125             Earnings before income taxes              26,536          25,247                                                                      Income taxes                                         8,757         8,710                                                                      NET EARNINGS                                        $ 17,779       $ 16,537                                                                                                                                           Earnings per share - diluted                        $ 1.28          $ 1.15 Weighted average shares outstanding - diluted         13,903          14,395                                                                                                                                                                                                          USANA Health Sciences, Inc. Consolidated Balance Sheets (In thousands) (Unaudited)                                                                         As of         As of ASSETS                                           28-Dec-13     29-Mar-14 Current Assets Cash and cash equivalents                        $ 137,343     $ 142,733 Securities held-to-maturity, net                   8,642         4,428 Inventories                                        47,242        46,890 Other current assets                              35,818       32,308 Total current assets                               229,045       226,359                                                                 Property and equipment, net                        59,180        58,843 Goodwill                                           18,243        17,933 Intangible assets, net                             42,329        41,210 Deferred income taxes                              5,519         5,695 Other assets                                      14,154       21,426 Total assets                                     $ 368,470     $ 371,466                                                                                                                                 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable                                 $ 9,502       $ 6,083 Other current liabilities                         86,369       73,861 Total current liabilities                          95,871        79,944                                                                                                                                 Other long-term liabilities                        1,211         1,204 Deferred income taxes                              10,866        10,577 Stockholders' equity                              260,522      279,741 Total liabilities and stockholders' equity       $ 368,470     $ 371,466                                                                                                                                   USANA Health Sciences, Inc. Sales by Region (Unaudited) (In thousands)                                                                                           Quarter Ended                              30-Mar-13                   29-Mar-14 Region                                                                         Americas and Europe          $ 64,152      37.9  %       $ 63,815      35.0  %                                                                         Asia Pacific                                                                         Southeast Asia Pacific         35,309      20.9  %         40,448      22.2  %                                                                         Greater China                  62,985      37.3  %         70,847      38.8  %                                                                         North Asia                    6,636       3.9   %        7,291       4.0   %                                                                         Asia Pacific Total            104,930     62.1  %        118,586     65.0  %                                                                         Total                        $ 169,082     100.0 %       $ 182,401     100.0 %                                                                                                                                                               Active Associates by Region ^(1) (Unaudited)                                                                                 As of                      30-Mar-13                         29-Mar-14 Region                                                                        Americas             78,000         34.1   %           82,000         30.9   % and Europe                                                                        Asia Pacific                                                                        Southeast Asia                 56,000         24.4   %           64,000         24.2   % Pacific                                                                        Greater              87,000         38.0   %           110,000        41.5   % China                                                                        North Asia           8,000          3.5    %           9,000          3.4    %                                                                        Asia Pacific              151,000        65.9   %           183,000        69.1   % Total                                                                     Total                229,000        100.0  %           265,000        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 from us 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                      30-Mar-13                         29-Mar-14 Region                                                                        Americas             55,000         82.1   %           61,000         78.2   % and Europe                                                                        Asia Pacific                                                                        Southeast Asia                 7,000          10.4   %           10,000         12.8   % Pacific                                                                        Greater              3,000          4.5    %           3,000          3.9    % China                                                                        North Asia           2,000          3.0    %           4,000          5.1    %                                                                        Asia Pacific              12,000         17.9   %           17,000         21.8   % Total                                                                     Total                67,000         100.0  %           78,000         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 from us any time during the most recent three-month period.  Contact:  USANA Health Sciences, Inc. Investors contact: Patrique Richards, 801-954-7961 Investor Relations Media contact: Dan Macuga, 801-954-7280 Public Relations  
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