USANA Health Sciences, Inc. (USNA)
Q1 2010 Earnings Call
April 28, 2010 11:00 AM EST
Riley Timer – VP of Finance
Jeff Yates – CFO
Fred Cooper – President and COO
Diederik Basch – Canaccord Adams
Madeline Miller -- D.A. Davidson & Company
Per Osland (ph) – Jefferies & Company
Previous Statements by USNA
» USANA Health Sciences Inc. Q4 2009 Earnings Call Transcript
» USANA Health Sciences Inc. Q3 2009 Earnings Call Transcript
» USANA Health Sciences Q2 2009 Earnings Transcript
I will now hand the conference over to your host, Mr. Riley Timer, Vice President of Finance, please go ahead sir.
Thank you, Danny. Good morning, everyone. We appreciate you joining us this morning to review our strong first quarter results. Today's conference call is being broadcast live via webcast and can be accessed directly from our website at www.usanahealthsciences.com. Shortly following the call, a replay will be available on our website.
As a reminder, during the course of this conference call, management will make forward-looking statements regarding future events or the future financial performance of our company. Those statements involve risks and uncertainties that could cause actual results to differ perhaps materially from the 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 am joined this morning by Dr. Fred Cooper, our President and Chief Operating Officer; Jeff Yates, our Chief Financial Officer; and Mark Wilson, our Executive Vice President of Sales.
We will hear first from Jeff, who will discuss the details of the financial results and speak specifically to our updated guidance. And then we will hear from Fred, who will provide regional results and discuss upcoming announcements that will impact our business in the future.
I will now turn the call over to Jeff.
Thank you, Riley, and good morning, everyone. I am delighted to be here with Fred and Mark to talk about our strong first quarter results and provide additional details about our plans and strategy for the balance of 2010. I will begin by reviewing the details of the income statement, then the balance sheet, followed by our guidance for 2010. Once again, it feels great to record that net sales for the quarter reached a new record at $119.1 million, which represents a 22.4% increase when compared with the $97.3 million we reported for the first quarter of 2009.
Please note that the first quarter will likely be our most favorable comparable when looking at year-over-year results in 2010 as the first quarter of 2009 experienced the most dramatic impact from negative changes in currency exchange rates.
Changes in FX rates during this quarter had a positive impact on our net sales by $8.6 million when comparing our results to the same period last year. That said when looking at net sales on our constant currency basis, we increased $13.2 million or 13.6% compared with Q1 last year. Our sales growth this quarter was primarily due to an overall increase in the number of active associates. This number increased by 10.9% when compared to the first quarter of 2009, which is the result of continued growth in our Asia-Pacific region.
Also contributing to our sales growth this quarter was the benefit we experienced from price increases that were implemented in certain markets during 2009. We also saw an uptick in the average amount purchased per associate during Q1 which was particularly evident in North America. We are optimistic about this increase and as we believe it is a sign of improving consumer confidence in this region.
Sales in North America increased by 8.3% or $4.6 million to $60.5 million as compared to the same period in the prior year, despite a decline in the number of active associates. Changes in foreign currency positively impacted sales in this region by $3.5 million. Excluding the impact of currency, sales in North America increased by 2% or $1.1 million.
Typically there was a strong correlation between sales and associate counts. In the first quarter, however, net sales increased while associate counts declined. A portion of this disconnect can be explained by year-over-year changes in FX rates and the remainder is due to an increase in sales per associate which only serves to augment momentum as we return to growth in active associates in this region.
During the first quarter, net sales in our Asia-Pacific region increased by $17.2 million or 41.5% when compared to the first quarter of 2009. Net sales in this region totalled $58.6 million during the quarter, representing just under 50% of our total sales. This sales growth is primarily due to a 26.4% increase in the number of active associates in the region. Our largest market in the region, Hong Kong increased by nearly 85% over last year. Notably South Korea sales more than doubled increasing a 105.4% and active associates increased 66.7% year-over-year. Although it accounts for a lower percentage of our total sales, we are pleased to see such strong momentum in this market.
As you know, our international business model allows our leaders to build and expand their businesses in all of our markets regardless of where their home market is located. As we have commented before, this has accelerated our growth in Asia-Pacific, while hindering our progress in North America. Another factor affecting Asia-Pacific is the anticipation of a new market. We typically open a new market every two to three years and our focus has been on the direct selling opportunity markets available in this region, evidenced by our opening of the Philippines just a year-ago.