USANA Health Sciences Reports Record Full-Year 2018 Results

USANA Health Sciences, Inc. (NYSE: USNA) today announced financial
results for its fiscal fourth quarter and full-year ended December 29,
2018.

Financial Performance

Fourth quarter 2018 net sales were $299.0 million, compared with $273.1
million in the prior-year period, or a 9.5% increase year-over-year. The
strengthening of the U.S. dollar negatively impacted net sales by $10.5
million for the quarter. The Company’s total number of active customers
increased 9.0% year-over-year to 616,000.

Fourth quarter net earnings were $32.3 million, or $1.32 per diluted
share, compared with a net loss of $5.9 million, or $0.24 per share
during the prior-year period. The net loss in the prior year period was
due to a one-time, non-cash charge of $30.1 million, or $1.24 per
diluted share, related to the U.S. tax reform (the “Tax Reform”) enacted
on December 22, 2017. Additionally, costs associated with China and the
Company’s internal investigation into its China operations, which was
first disclosed in February 2017, negatively impacted fourth quarter
2017 net earnings by approximately $2.7 million and earnings per diluted
share by $0.11. Excluding both the impact of the Tax Reform and the
expense related to China and the Company’s internal investigation, net
earnings increased 20.4%, or $0.21 per diluted share.

“USANA finished the year with another quarter of solid results,
bolstered by our annual China National Sales Meeting in Macau and a few
targeted product promotions in select markets,” said Kevin Guest, Chief
Executive Officer.

Weighted average diluted shares outstanding were 24.5 million for the
fourth quarter of 2018, compared with diluted shares of 24.0 million in
the prior-year period. During the quarter, the Company repurchased
682,843 shares of common stock for $79.8 million. The Company ended the
quarter with no debt, $214.3 million in cash and cash equivalents, and
$63.5 million invested in short-term securities. As of December 29,
2018, there was $70.2 million remaining under the current share
repurchase authorization.

Regional Results

Net sales in the Asia Pacific region increased by 12.2% to $243.3
million for the fourth quarter of 2018. The total number of active
customers in the Asia Pacific region increased by 14.1% year-over-year.
Within Asia Pacific, net sales increased:

• 14.1% in Greater China;
• 25.3% in North Asia; and
• 3.3% in Southeast Asia Pacific.

Sales growth in Greater China was primarily driven by 17.4% active
customer growth in Mainland China, while sales growth in North Asia
resulted from 19.4% active customer growth in South Korea. Sales growth
in Southeast Asia Pacific was driven by 21.9% active customer growth in
the Philippines.

Net sales in the Americas and Europe region decreased by 1.1% to $55.8
million for the fourth quarter of 2018, primarily due to a 6.5% decrease
in active customers.

“We continued to generate strong local currency growth across most of
our markets during the fourth quarter, despite an unfavorable impact
from currency exchange rates,” continued Mr. Guest.

2018 Results

Net sales for fiscal 2018 increased by 13.6% to $1.189 billion, compared
with $1.047 billion in 2017. Changes in foreign currency exchange rates
positively impacted net sales by $12.2 million. On a constant currency
basis, net sales increased by 12.4% during fiscal 2018.

Net earnings for 2018 increased by 101.8% to $126.2 million, or $5.12
per diluted share, compared with $62.5 million, or $2.53 per diluted
share in the prior year. Net earnings in 2017 were reduced by a
one-time, non-cash charge of $30.1 million, or $1.22 per diluted share,
related to the Tax Reform. In addition, costs related to China and the
Company’s internal investigation into its China operations in 2017
totaling $7.6 million after tax negatively impacted earnings per diluted
share by $0.31. Excluding both the impact of the Tax Reform and the
expense related to China and the internal investigation, 2018 net
earnings improved by 26.8%, or $1.10 per diluted share. Weighted average
diluted shares outstanding were 24.6 million for the full year 2018,
compared with 24.7 million in the prior-year period.

Mr. Guest added, “Fiscal 2018 marks the 16th consecutive year that USANA
has delivered record sales. Leverage generated from this exceptional
sales growth produced stronger than anticipated operating margins and
the highest net earnings in the history of the Company. Outside of our
financial performance, we accomplished several meaningful initiatives
that generated momentum and better positioned us for continued growth
into the future. Notably, Celavive® generated approximately $38 million
in incremental sales in 2018, growing skincare sales to 9.0% of net
sales in the fourth quarter.

“We also made significant progress in improving our global IT
infrastructure, particularly in China where we launched several
improvements to enhance our customer’s experience, that we believe
contributed to our active customer growth during the year. In 2019, we
will continue to focus on growing our customer base by further improving
the speed, convenience, and ease of doing business with USANA,”
concluded Mr. Guest.

Outlook

The Company provided the following consolidated net sales and earnings
per share outlook for fiscal year 2019:

• Consolidated net sales between $1.25 billion and $1.30 billion,
  representing growth between 5.1% and 9.3% (or growth of 7.3% to 11.5%
  in constant currency); and
• Earnings per share between $5.25 and $5.55.

The Company’s outlook for the year reflects:

• A negative impact from foreign exchange rate changes of approximately
  $26 million;
• An estimated operating margin of between 14.7% and 15.0%;
• An effective tax rate of approximately 34%; and
• An annualized diluted share count of approximately 24.2 million.

Chief Financial Officer Doug Hekking, commented, “We generated solid
revenue growth and excellent margins during 2018. Our outlook for 2019
reflects our confidence in the business around the world and our
expectation of solid top- and bottom-line results during the year. As
indicated in our guidance, we expect constant-currency sales growth at
the upper-end of our range to be in line with year-over-year growth in
fiscal 2018.”

Internal Investigation of China Operations

As the Company first disclosed in February 2017, it is voluntarily
conducting an internal investigation of its China operations, BabyCare
Ltd. The investigation focuses on compliance with the Foreign Corrupt
Practices Act and certain conduct and policies at BabyCare, including
BabyCare’s expense reimbursement policies. The Audit Committee of the
Company’s Board of Directors has assumed direct responsibility for
reviewing these matters and has hired experienced counsel to conduct the
investigation. While the Company does not believe that the subject
amounts are quantitatively material, or will materially affect its
financial statements, it cannot currently predict the outcome of the
investigation on its business, results of operations, or financial
condition. The Company’s internal investigation is substantially
complete, however, the Company continues to cooperate with the
Securities and Exchange Commission and the United States Department of
Justice. The Company cannot currently predict the duration, scope, or
result of the investigation.

Non-GAAP Financial Measures

The Company prepares its financial statements using U.S. generally
accepted accounting principles (“GAAP”). Constant currency net sales,
earnings, EPS and other currency-related financial information
(collectively, “Financial Results”) are non-GAAP financial measures that
remove the impact of fluctuations in foreign-currency exchange rates and
help facilitate period-to-period comparisons of the Company’s Financial
Results that we believe provide investors an additional perspective on
trends and underlying business results. Constant currency Financial
Results are calculated by translating the current period's Financial
Results at the same average exchange rates in effect during the
applicable prior-year period and then comparing this amount to the
prior-year period's Financial Results.

Net earnings and EPS results for a reporting period which exclude (i)
the incremental impact of U.S. Tax Reform; and (ii) incremental expense
related to the Company’s internal investigation in China are also
non-GAAP financial measures that are intended to help facilitate
period-to-period comparisons of the Company’s Financial Results.

• EPS results excluding the impact of the U.S. Tax Reform are calculated
  by (i) calculating the total incremental expense related to the U.S.
  Tax Reform; and (ii) dividing the expense by the total number of
  diluted shares outstanding for the applicable reporting period.
• EPS results excluding expense related to the internal investigation
  are calculated by (i) calculating the total incremental expense
  related to the internal investigation after taxes; and (ii) dividing
  the expense by the total number of diluted shares outstanding for the
  applicable reporting period.

The following is a reconciliation of net earnings (loss), presented and
reported in accordance with GAAP, to net earnings adjusted for the two
items noted above:

The following is a reconciliation of diluted earnings (loss) per share,
presented and reported in accordance with GAAP, to diluted earnings per
share adjusted for certain items:

Conference Call

The Company has posted the “Management Commentary, Results and Outlook”
document on the Company’s website (http://ir.usana.com)
under the “Investor Relations” section of the site. USANA will hold a
conference call and webcast to discuss today’s announcement with
investors on Wednesday, February 6, 2019 at 11:00 AM Eastern Time. Investors
may listen to the call by accessing USANA’s website at http://ir.usana.com.
The call will consist of brief opening remarks by the Company’s
management team, before moving directly into questions and answers.

About USANA

USANA develops and manufactures high-quality nutritional supplements,
healthy foods and personal care 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, Colombia, Indonesia, Germany,
Spain, Romania, and Italy. More information on USANA can be found at www.usana.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, risks associated with our international
expansion and operations, and risks associated with the internal
investigation into BabyCare’s operations. 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.

(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 resale.
(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. China utilizes a
Preferred Customer program that has been implemented specifically for
that market.

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