Welcome to the USANA Health Sciences’ First Quarter Earnings Conference Call. (Operator Instructions) This conference is being recorded today, Wednesday, April 29, 2009. I would now like to turn the conference over to Mr. Riley Timmer, Vice President of Finance. Please go ahead, sir.

We appreciate you joining us this morning to review our 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. Again, 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. I’ll now turn the call over to Jeff Yates, Vice President and Chief Financial Officer.

We appreciate you joining us on the call today. With me this morning is Dr. Fred Cooper, our President and Chief Operating Officer, and Mark Wilson, Executive Vice President of North America. Following my remarks, Fred will discuss our regional top-line results and certain key indicators of our business. Yesterday after the close of market, we issued our results for the first quarter 2009. Net sales in the first quarter were $97.3 million, a decrease of 4.2% compared with $101.6 million reported in the first quarter of 2008. This decrease was due almost entirely to the negative impact of changes in currency exchange rates which reduced net sales by 9.7% or $10.4 million. Excluding the impact of currency, net sales for the first quarter would have been about $108 million representing a growth rate of about 6%. We expect that currency exchange rates will continue to negatively impact the year over year comparison of our operating results in at least the second and third quarters of this year. In fact for the full year of 2009, we’re expecting that the negative impact from currency exchange rates will reduce net sales by as much as $34 million. I have commented before that it is our practice to hedge expected cash flow from our international operations. We will continue to do this, and additionally we are currently evaluating the potential costs and benefits of hedging the topline and the balance sheet. Lower than expected sales in the US also contributed to the decrease in net sales. Sales in the US decreased 5.3% or a little over $2 million compared to the first quarter of 2008. We believe that our results in the US did not meet expectations primarily because of difficult economic conditions which contributed to an anticipated reduction in associates. Despite…

Good morning, everyone. I want to begin by discussing some regional results and our key business drivers. With over 60% of our sales coming from markets outside of the US, we’ve enjoyed the benefit of a globally diverse business. With those benefits, however, comes exposure to the international market conditions such as currency rate fluctuations. Over the last year, our local currency sales growth has been bolstered by positive changes in currency exchange rates, enhancing already solid results in most of our markets. I am pleased again to report local currency growth in most of our markets, despite the global economic conditions that currently exist. Unfortunately, changes in currency exchange rates have dramatically reduced our reported net sales and have hidden the underlying strength of most of our markets. For example, reported sales in Mexico were down 13.1%, and Canada declined by 19.6%. In local currency, however, sales in Mexico increased by 15.4%, while sales in Canada were basically flat. Reported net sales during the first quarter in North America were down 10.2% or $6.4 million, compared with the first quarter of 2008. Excluding negative currency changes, sales in North America were down only 2.2%. Now, we’re disappointed that net sales in the US were down 5.3% compared with last year and nearly 14% compared with the fourth quarter. Keep in mind, however, that in the fourth quarter of 2008, it was a 14-week quarter. We believe that our results in the US didn’t meet our expectations because of the difficult economic conditions, which contributed to an unanticipated drop in the number of our active associates. During the first quarter, associate counts in the US decreased by 7.9% from the fourth quarter of 2008. To understand this decline, I want to talk about the significant increase in the number of…

(Operator Instructions) Your first question comes from the line of Douglas M. Lane - Jefferies and Company.

Can you give us a feel for the associate incentives line which was up a little bit? Is that kind of a going run rate now, or is there something coming down the pipe that might alter that in future quarters this year?

Actually it has increased a little bit due to the elite bonus and the matching bonus, but that line, you wouldn’t expect to see that continued increase as compared to total sales. It’s going to flatten out.

So it’ll still be up year over year, but probably consistent with the first quarter as a percent of sales?

Yes.

You mentioned the sequential decline, particularly in North America where it seemed to be the impactful. What specifically do you think are you going to put in place to try to reverse that, and do you think that’s something that can happen as soon as this quarter?

One of the things we’re learning is as Fred talked about the Philippines opening, we had a number of our top leaders spend all of December, the majority of January, and even into February—some are just now returning home, that certainly played an impact when some of your top income earners worldwide are from the US, and I believe I had about 7 of them US alone that spent a significant amount of time over there in looking at the opportunity. As they return home, I think that obviously is going to give us that impact and leadership back in the US again. We also have been doing a lot of training on these new compensation plan enhancements. As easy as we try to make them, any time you do a change to this many people, it takes time for them to really understand and grasp the power of what we’ve done, so we’ve been spending a lot of time on that, and I think as people are starting to grasping this, you’re going to see that continued enrolment trend as well as the strength of the overall growth in the US start to rebound a little more. We’re seeing some very optimistic things. We just completed a regional in San Antonio, Texas, where we saw a number of guests there. That was positive, and the trend will head in that direction. The other thing is we’re starting to attract other potential leaders, big leaders, that are looking at USANA for the first time with these enhancements, that I think we’re now appealing to them, and we’ve entertained several of these already, and I think that’s going to result in some positive things this year.

It’s very helpful, and I can see the interest in going to the Philippines and getting a foothold in that large market. From a timing standpoint, are those key leaders back in the US and Canada, and then once they come back, how long do you think before that’s reflected in their sales with their US and Canadian networks?

All but two of them are back right now to my knowledge, and I think while they’ll return from time to time, while they’re establishing the market, several will not return as I’ve spoken to them because it hasn’t resulted in the desire or the impact they had hoped to gain, so it’s a matter of what leadership they gained over there, so they’ll be focusing, and you will see an increase going forward here in North America pretty quickly.

I just wanted to add one additional comment to Mark’s comments, and that is when we introduce compensation enhancements or changes in the program such as we did, we would always expect a significant initial response followed by some commensurate reduction in those initial responders, but the evidence that we’re seeing in this quarter and going forward and the evidence is strong that the new customers that are coming into the business has increased at a higher level, and so while that initial response had increased our accounts through the fourth quarter with the drop-off that Fred mentioned in the first quarter, we anticipate that this will carry forward as Mark mentioned, in the long term.

Your next question comes from the line of Rommel Dionisio – Wedbush Morgan. Rommel Dionisio – Wedbush Morgan : I just wanted to follow up on Doug’s question with regard to the impact of the opening of the Filipino market on the US business. Why would US and Canada be more impacted than markets of much closer geographic proximity than the Philippines, like Southeast Asia or Australia or something? Did you not see a drop-off in those markets as opposed one in the US and Canada?

That’s a great question. The reality is when you look at the leaders that have jumped into the Philippines market, the majority were from the US. We had a few from Canada, and a few from some of our other markets, but the majority was of focus from the US associates, especially because of the relationship of the Filipino customers and associates that we currently have in the US, so I think they saw this as an appealing market. It was English-speaking, it was an easy entry, as opposed to trying to go to Taiwan or Hong Kong where I don’t speak the language. Rommel Dionisio – Wedbush Morgan : But you didn’t see any drop off in Australia or any of that?

No, we really didn’t have a large group of leadership from those markets that went to the Philippines to my knowledge. I was over there. I hardly saw anybody other than English leaders. We had a few, one or two, from maybe one of our Asian markets and what not, but the vast majority, in biggest teams were all from US organizations.

Your next question comes from the line of Timothy S. Ramey - D.A. Davidson.

Fred, as we think back over the course of the last two years, we’ve seen a pretty significant erosion in margins, not coming at the gross margin level, but coming at the associate incentive expense and also at the G&A level. I’m concerned about it. I know you’re thinking you’re getting bang for your buck, but just compared to 2007 margins, the 2009 forecast now is almost down 600 basis points in operating margin. When are we going to know if we’re getting bang for our buck on some of these investments?

Speaking directly to the reference that you’re making on our margins, actually we have a concerted effort this year to raise our prices on the kits that are initially offered to our associated when they get into the business. Some of these kits, relatively speaking, would represent a significant portion of money for us, so I think you’re going to see some increase due to the raises in those prices. Also in some of our international markets, we’ve gone through and looked at pricing adjustments as well.

So we’re going to see it at the gross margin level, but the admin expense and the selling expense line, should we continue to think that those as permanently impaired by maybe 200 to 300 basis points?

My answer to that is USANA’s management actually has had several meetings in an executive retreat we had to be a lot more conscientious on our budgets and our expenditures that we’re going to be doing throughout the year, but as long as the dollar exchange rate/currency situation that we do, yes, that’s going to have an impact on that line.

Your next question comes from the line of Dietrich Bass - Canaccord Adams.

I just want to talk a little more on the distributor levels in the US and the current momentum. I just want to sure I understand that the recruiting that you saw over the last few quarters driven by the change in the comp plan, are you saying that was short term?

No, not at all. What we said was because we introduced a very short window of opportunity for those who had not qualified as a platinum pacesetter in the program where they have to go out and find four new people, we saw a bump per se in that initial burst there, but we believe this will gain ground as time goes on. As people start to understand the power of the matching bonus program as well as the elite bonus for the competition at the top end, this will result in and our anticipation is that it will result in continued growth for enrolments, so we see this as a long-term thing.

In Mexico, I realize it’s only been a few days with this swine flu that we’re hearing about, but do you have an estimate of your exposure to Mexico City, and have you factored any of this into your guidance?

Let me speak out, and I don’t know if anybody else has any comments on this. Mexico, I don’t see any impact so far. I’ve been in contact with them. We certainly have an office in Mexico City, but to date there’s been no impact there, and no one has had any results or scares or anything to that effect to this point.

Final question for Jeff, you talked about lower freight costs in the quarter. I was just wondering if you can give an update on some of the other commodity costs?

Overall, our raw material costs are staying fairly flat. We’re not seeing significant costs in the materials, and so the majority of the savings in the shipping costs have been through just the surcharges and freight costs, otherwise we’re staying pretty flat. Other benefit, as we mentioned before, are from improvements in our operating efficiencies, particularly in our shipping lines.

To further on that, we spent a significant amount of money in pick-to-light systems on our shipping lines to make us much more efficient on our labor per package shipped, so our throughput rate on that line is also going to continue to improve because we’ve also built in a lot of capacity to be able to pick faster with the same amount of labor that we have.

It appears we have no further questions at this time. I will turn it back to management for any closing remarks.

Thank you everybody for the questions. If you have any remaining questions, please feel free to contact Patrick Richards in Investor Relations at 801-954-7961. Thank you for your time.