USANA Health Sciences, Inc. (USNA)

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USANA Health Sciences Inc (USNA)

Q3 2009 Earnings Call

October 28, 2009; 11.00 am ET

Executives

Riley Timmer - Vice President of Finance

Fred Cooper - President & Chief Operating Officer

Jeff Yates - Chief Financial Officer

Mark Wilson - Executive Vice President, North America

Analysts

Deadore Iqbash - Canaccord Adams

Tim Ramey - D.A. Davidson

Rommel Dionisio - Wedbush Morgan

Per Osland - Jefferies & Co.

Mimi Noel - Sidoti & Co.

Presentation

Operator

Ladies and gentlemen, thank you for standing by and welcome to the USANA Health Sciences third quarter earnings conference call on 28 October, 2009. Throughout today’s recorded presentation all participants will be in a listen-only mode. After the presentation, there will be an opportunity to and questions. (Operator Instructions)

I will now hand the conference over to Mr. Riley Timmer, Vice President of Finance. Please go ahead.

Riley Timmer

Thanks operator, good morning everyone. We appreciate you joining us this morning to review your third quarter result. Today’s conference call is being broadcast live via webcast and can be access directly from our website at www.usanahealthsciences.com.

Surely following the call, a replay will be available on our website. As a reminder, during the course of this conference call, the management will make forward-looking statements regarding future events for the future financial performance of the company.

Those statements involve risks and uncertainties that could cause actual results to differ perhaps materially in your results projected in such forward-looking statements. We caution you that these statements should be considered in conjunction with the disclosures, including specific risk factors and financial data contained in our most recent filings with the SEC.

Now, I’m please just wanted to be joined by Dr. Fred Cooper, our President and Chief Operating Officer; Jeff Yates, our Chief Financial Officer; and Mark Wilson, our Executive Vice President of North America.

Before I turn the call over to Jeff to go through the details I’d like to touch briefly on the highlights for the quarter. For the third quarter, solid reported year-over-year growth, net sales increased 3.3% to $110.8 million. Earnings per share increased 2% to $0.51 and the number of active associates grew by 8.2% to 189,000. We were particularly pleased with the growth of our Asia Pacific region where despite the negative impact of currency exchange rates we’re reporting record sales and a record number of active associates.

This region continues to perform impressively and now accounts for more than 45% of our total sales. Also, among our successes from the quarter was the completion of our 17 annual international convention, which we held in Salt Lake City. With near record level attendance at this event we announced new products and training tools and heard from several renowned speakers.

In addition to providing a great platform for launching new products these events provide good opportunities to educate sell grade and motivated associates who always return home with renewed focuses and energy.

With that I’ll turn the call over to Jeff to provide you with the financial details of the quarter.

Jeff Yates

Thank you, Riley and good morning everyone. As Randy indicated the third was another good quarter for USANA. We are pleased with our financial results and the performance of the business is particularly in light of the lingering economic challenges. Net sales for the third quarter reached $110.8 million dollars compared with $107.2 million reported for the third quarter of 2008.

Once again, year-over-year sales were negatively affected by currency fluctuations. Consequently our net sales for the third quarter of ‘09 were reduced by $4.1 million. Changes in currency exchange rates have had a significant negative impact on our business over the last year. With nearly 66% of you are sales coming from markets outside US, which is a percentage that is continually growing, fluctuations and exchange rates will continue to have a more significant impact on our business both negatively and positively.

Year-to-date the unfavorable currency effect has reduced our net sales by nearly $24 million. We are now expecting however that year-over-year currency comparisons for most of our markets will be slightly favorable in the fourth quarter. Looking now at our regional results, net sales for the third quarter in North America decreased by 6.7% or $4.3 million to $60.3 million compared with the prior year.

Again, negative changes in exchange rates were the primary cause of this decrease, reducing sales by $2.5 million in this region. Notwithstanding the currency challenge, we were disappointed with our results in North America as sales were softer than we’d anticipated in both the U.S. and Canada. Fred will discuss this in greater detail in a moment. Notably, local currency sales increased 15% in Mexico. Now we are very pleased with the exceptional performance of our Asia Pacific region.

During the third quarter, net sales increased $7.9 million or 18.5%. This increase resulted in a record $50.5 million in sales. Excluding the impact of foreign currency, sales in Asia Pacific would have increased by 22.3%. The double digit growth in Hong Kong, Malaysia, South Korea and the addition of $9 million in sales in Philippines were the drivers for strong performance in Asia Pacific.

We’re also pleased to report the number of activity associates in Asia Pacific increased 19.8% to 97,000 setting another record associate count for that region. That’s up from 81,000 during the same period in 2008. Again, Hong Kong, Malaysia and South Korea were the main contributors to this growth in addition to the 6,000 new associates in the Philippines.

Read the rest of this transcript for free on seekingalpha.com