USANA Health Sciences Reports First Quarter 2019 Results

USANA Health Sciences, Inc. (NYSE: USNA) today announced financial
results for its fiscal first quarter ended March 30, 2019 that were in
line with the preliminary results provided on April 2, 2019.

Financial Performance

First quarter 2019 net sales were $273.0 million, compared with $292.0
million in the prior-year period, or a 6.5% decrease year-over-year. The
strengthening of the U.S. dollar unfavorably impacted net sales by $13.3
million for the quarter. The Company’s total number of active customers
at the end of the first quarter was 586,000, compared to 585,000 in the
prior-year period.

First quarter net earnings were $24.2 million, or $1.01 per diluted
share, compared with $28.9 million, or $1.19 per share during the
prior-year period.

“As we reported in early April, three factors unfavorably affected our
sales results for the first quarter of 2019,” said Kevin Guest, Chief
Executive Officer. “First, our 2019 operating plan contained very little
promotional activity during the first quarter but calls for increasing
promotional activity as the year progresses. This had a more significant
impact on our global momentum than we anticipated, particularly during
the seasonal slow-down that we experience each year in many of our
markets during Chinese New Year. Second, the Chinese government’s
100-day review of the health product and direct selling industries that
occurred during the quarter was accompanied by unexpected, persistent,
negative media coverage about these industries in China. This media
coverage affected our sales in China for the quarter. Finally, the
unfavorable impact of a stronger U.S. dollar on net sales was also
significant.”

Regional Results

Net sales in the Asia Pacific region decreased by 4.8% to $220.9 million
for the first quarter of 2019. On a constant currency-basis, net sales
in the Asia Pacific region increased 0.3% during the first quarter of
2019. The total number of active customers in the Asia Pacific region
increased by 2.9% year-over-year. Within Asia Pacific, net sales:

• Decreased 8.7% in Greater China;
• Decreased 3.0% in Southeast Asia Pacific; and
• Increased 22.9% in North Asia.

Active customers increased modestly by 1.8% and 0.7% in Southeast Asia
Pacific and Greater China, respectively. Net sales growth in North Asia
resulted from 27.3% growth in active customers in South Korea.

Net sales in the Americas and Europe region decreased by 13.0% to $52.1
million for the first quarter of 2019, primarily due to an 8.6% decrease
in active customers.

“Despite our softer than expected start to the year, we continue to
believe that we can deliver growth in 2019,” added Mr. Guest. “Our
promotional calendar kicked off during the second quarter and we remain
confident that these promotions and initiatives will generate sales
momentum during the year. Additionally, the 100-day review in China
concluded in mid-April, and we expect to see a more typical operating
environment in China going forward. Although it takes time to recapture
momentum, we believe we will begin to do so during the second quarter
and that our results will further accelerate during the second half of
the year. We are confident in the strategies we have in place around the
world and believe that 2019 will be another record year for USANA.”

Share Repurchase Program Update

During the quarter, the Company repurchased 283,595 shares of common
stock for $30.0 million and ended with weighted average diluted shares
outstanding of 23.9 million. The Company continues to have a strong
balance sheet with no debt, $225.0 million in cash and cash equivalents,
and $26.9 million invested in short-term securities. As of March 30,
2019, there was $40.2 million remaining under the current share
repurchase authorization. The Company’s Board of Directors has
authorized up to $150 million in share repurchase authorization, which
is inclusive of the $40.2 million currently authorized. Repurchases may
be made from time to time, in the open market, through block trades or
otherwise, subject to applicable rules of the Securities and Exchange
Commission. 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 reiterated the following consolidated net sales and earnings
per share outlook for fiscal year 2019:

• Consolidated net sales between $1.21 billion and $1.26 billion,
  representing growth between 1.7% and 5.9% (or growth of 3.6% to 7.9%
  in constant currency);
• Earnings per share between $5.00 and $5.35.

The Company’s outlook for the year reflects:

• An estimated operating margin of between 14.3% and 14.7%;
• An effective tax rate of approximately 34%;
• An annualized diluted share count of approximately 23.7 million, which
  does not reflect future share repurchases; and
• An unfavorable impact of approximately $23 million related to a
  stronger U.S. dollar.

Chief Financial Officer Doug Hekking commented, “We remain confident in
the underlying strength of our business around the world and the
strategies in place to generate growth as the year progresses. While our
operating margin may be modestly impacted in the short-term, I expect it
to remain in line with our long-term strategy, which is intended to
drive long-term sustainable growth in active customers.”

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.

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, May 1, 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: regulatory risk in China
following the Chinese government’s 100-day review of the health product
and direct selling industries; continued negative media coverage in
China following the Chinese government’s 100-day review of these
industries; global economic conditions generally; reliance upon our
network of independent Associates; risk associated with governmental
regulation of our products, manufacturing and marketing activities;
adverse publicity risks globally; 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. The
forward-looking statements in this press release set forth our beliefs
as of the date hereof. We do not undertake any obligation to update any
forward-looking statement after the date hereof or to conform such
statements to actual results or changes in the Company’s expectations,
except as required by law.

(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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