Usana posts hefty sales

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After reporting the company's sixth year of record sales and earnings, Usana Health Sciences' chief financial officer said the company will be looking for opportunities that could result from the deteriorating U.S. economy.

The company said Wednesday that sales for its fiscal year ended Dec. 29 reached $423.1 million, a 15.9 percent increase from sales of $365.2 million posted in its previous fiscal year.

Earnings per share for the year from continuing operations increased by 18.7 percent, to $2.67, compared with $2.25 per share for fiscal 2006.

"We continue to believe that our home-based business model offers us flexibility in both up and down markets," CFO Gilbert Fuller said in a conference call with securities analysts.

"While declining disposable-income spending may be impacting us in the near term, we believe that, in the long run, our direct-selling opportunity will attract individuals as a way to supplement their incomes," Fuller said.

Usana reported that sales in the fourth quarter of 2007 increased by 10.8 percent and reached $108.7 million, compared with $98.1 million in the fourth quarter of the 2006 fiscal year. Its fourth quarter profit, however, fell slightly to $11.06 million, or 67 cents per share, from $11.1 million or 61 cents per share in the same quarter a year earlier.

The company said that during the fourth quarter in North America it experienced softer-than-expected sales and associate numbers.

"We attribute this decline primarily to the toll that various false allegations have taken on our associates during 2007," said Dave Wentz, the company's president. "We believe that these challenges are now largely behind us."

Wentz was referring to a report released last year by Barry Minkow, an investigator who spent time in prison for securities fraud but now runs a business known as the Fraud Discovery Institute.

Minkow's report, which was initially cited in The Wall Street Journal's well-known "Heard on the Street" column, contended that Usana's business model was "primarily based upon sales to a continuously collapsing pool of associates that need to be replaced monthly and yearly."

Minkow's report led to a U.S. Securities and Exchange Commission investigation of Usana. The SEC ended its investigation in January and reported it was taking no action against the company.

Analyst Timothy S. Ramey said Wednesday that because of the weak U.S. economy and the dampened recruiting efforts for new U.S. associates, he was reducing his 2008 estimates of Usana's earnings to $2.90 per share from $3.05.

Ramey, senior research analyst at D.A. Davidson & Co., nevertheless indicated he was maintaining his "buy" recommendation on the company's stock, arguing that even on reduced expectations, Usana should outperform the average consumer packaged goods company.

As a result of Usana's flat fourth-quarter profits, the company's shares closed Wednesday at $38.41, down $7.09 for the day.

steve@sltrib.com