Good day, ladies and gentlemen, thank you for standing by. Welcome to the USANA Health Sciences Fourth Quarter Earnings Conference Call. [Operator Instructions] This conference is being recorded today, February 6, 2013. I would like to turn the conference over to Patrique Richards. Please go ahead, Sir.

Good morning, everyone. We appreciate you joining us this morning to review our fourth quarter and full year results, as well as our preliminary outlook for 2013. 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. Examples of these statements include those regarding our personalization initiative, our strategies for each of our regions and our initial outlook for 2013. 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'm joined this morning by Dave Wentz, our Chief Executive Officer; Paul Jones, our Chief Financial Officer; Kevin Guest, President of the Americas, Europe and South Pacific; and Doug Hekking, our Vice President of Financial Strategy. We'll hear first from Dave, who will discuss our business activities during the quarter and year, as well as our strategies for 2013. We'll then hear from Kevin, who will provide us with an update on North America. And finally, we'll discuss -- Paul will discuss our financial results and 2013 financial outlook. I'll now turn the call over to Dave.

Thanks, Pat, and good morning, everyone. I'm excited to be with you this morning to again present an excellent financial performance by USANA. Looking first at our fourth quarter results, I'm pleased to report that USANA delivered its fourth straight quarter of record sales and earnings. In addition, this was the 10th consecutive year of record sales and the highest net earnings in EPS in the company's history. Our record performance is the result of the significant effort from our employees and associates around the world and to the execution of the strategies that our management team has put in place. These strategies include our personalization initiatives, our efforts to grow Greater China and our initiative to regain momentum in North America. I'll begin this morning by discussing our progress on each of these strategies and our expectations for 2013. During 2012, we officially launched our personalization strategy, which focuses on personalizing our product offerings and customer experience around the world. Under this strategy, we expanded the availability of our flagship MyHealthPak product to our international markets. MyHealthPak is a fully personalized supplement pack that can include virtually any of our essentials or optimizer products. We also introduced 2 proprietary health assessment apps for our customers called the True Health Assessment and True Health Companion. The use of technology like these apps is a very effective way to provide our Associates with an innovative and personalized way to market USANA products to new and existing customers. We launched these new apps at our 2012 International Convention by giving every Associate in attendance a free iPad with a preloaded version of the True Health Assessment. During the fourth quarter, we worked to train our Associates on how to use these new apps as they market to USANA to potential customers. The…

Thanks, Dave, and good morning. I'm encouraged by the progress we've made in our North America/Europe region in 2012. Although this region has been flat to modestly down in recent years, fourth quarter sales increased 6.4% year-over-year and full year 2012 sales increased 3.4% year-over-year. Associate counts in the region were flat year-over-year, which is also an improvement over the recent historical trend. Sales growth in North America is being driven mainly by increased Associate productivity in the U.S. and continued customer growth in Mexico. In the U.S., we continue to see a growing number of Associate leaders who are increasing their personal activity in developing their sales organizations. Notably, Mexico had a great year with local currency growth of 33%. Our success in this market is due to the reengagement of many Associate leaders and to a market-specific promotion that has created excitement and incentive for our Associates to grow their organizations. We expect our momentum in Mexico to continue in 2013. As Dave already mentioned, customer growth is going to be our primary focus in 2013. We have several initiatives planned in North America to accomplish that goal. First, we will continue to execute our personalization strategy. In addition to the product and technology initiatives that Dave mentioned, our personalization focus in North America is particularly -- and particularly the U.S., will be on training our growing number of new leaders, as we focus on personal development and leadership skills. Our management team will continue to actively participate in Associate events, meetings and calls across North America to assist our current Associate leaders and improve the skill set of the rising generation of new Associate leaders. At these venues, our training on personalization will focus not only on our True Health Assessment and True Health Companion apps, but…

Thanks, Kevin. Thanks for your comments, Kevin. Before we hear from Paul, I want to reiterate my confidence and optimism for our business in 2013. USANA produced excellent results in 2012, and as a management team, we watched the momentum and our business build quarter after quarter. I believe that this momentum will continue throughout 2013, and as we execute the strategies our team has implemented, we will drive USANA to another record year [Audio Gap] to review our financials and discuss our updated guidance.

Thanks, Dave. It's great to be on the call today to discuss USANA's excellent results. I'll begin by reviewing our fourth quarter financial results and commenting on the better-than-anticipated results. I'll then discuss our updated financial guidance before turning the call over for questions. Sales for the fourth quarter increased 15.5%. Our Active Associate base increased 11.3% during the quarter, primarily as a result of strong customer growth in several Asia Pacific markets and Mexico. Other notable items that continued to -- that contributed to net sales growth include price increases that we implemented during the first quarter of 2012 in certain markets in our Asia Pacific region, increased productivity from Associates in North America, sales of $1.4 million from our newest markets, and favorable changes in currency exchange rates that contributed $3.1 million to the top line for the quarter. Gross margins declined 100 basis points year-over-year, largely as a result of increases in material costs and unfavorable changes in the sales mix by market. These increases were partially offset by the price increases that we implemented during the first quarter and by the positive impact of changes in currency. Associate incentives expense for the quarter decreased to 42.2% of net sales compared to 46% in the prior year quarter. This decrease can primarily be attributed to the price increases just mentioned and the change to the Lifetime Matching Bonus program launched in the second quarter. I'll remind you that we expect the payout under the Lifetime Matching Bonus to gradually increase relative to net sales over time. These benefits were partially offset by spending on contests and promotions that we ran during the quarter. SG&A in the fourth quarter came in at 23.2% of net sales, which was essentially flat from the fourth quarter of 2011. The year-over-year…

[Operator Instructions] Our first question comes from the line of Scott Van Winkle with Canaccord Genuity.

I guess the biggest question I have is on the pricing initiative. If I remember correctly, years ago, you tried a value pricing initiative. Am I remembering that correct? And what was the impact on that, maybe in the short-term and the long-term, to kind of put this into perspective?

Over 10 years ago, I think it was -- we did a value initiative where we lowered prices dramatically when we saw GNC and others lowering their prices. And as you can see, it led to 10 years of record results. So this is a little bit different. It's only a few of our markets, and it's a smaller decrease, much smaller than we had before. So we think initially, of course, sales will drop with that price decrease, but we expect to get much more growth from active customers, people coming in and staying with the business. And so, yes, short-term pressure, but then we want to get that business growing in those regions.

Okay. Sad, David. 10 years seems like it was yesterday. I'm older than I thought I was. And how about magnitude? It's -- say the Essentials are $50 and they go to $40. And I'm wondering, because the last time it was more broadly, how do you manage kind of the cross-border relative pricing?

Well, it's much smaller, much smaller decrease and it was to fix the cross-border disparity that we had. We had created disparity in markets, and so people were looking across the borders and saying they were getting a better price there just because the exchange rate changes over the years. And so we needed to correct that to get parity, to make it a fair playing ground across all regions. And not have an incentive, oh, you're lucky to be living here and not living there. And that was a big step, but we needed to fix that. And the leaders were very supportive and understanding that we needed to get the parity across markets, because we're an international seamless plan and it's got to be the same playing field across the world.

Thanks. And the big push in the U.S. is the customization, and you made some comments there. What's the -- what's been kind of the initial response? Obviously, it's positive or you wouldn't be doing it, but what's happening to activity within distributor and customer base?

Well, one of the things that we're very encouraged by in the U.S. is we're seeing the generational change or seeing a much younger audience and much younger customer base as the Gen Y-ers engage in USANA. And a major focus of our personalization effort is technology and the use of iPads and making it easier to do business with USANA. And so in the U.S., as we've seen that roll out, we're seeing a great impact initially and being well-embraced, as they're utilizing the iPads that were given to them at convention and as we become more technology focused and gravitate towards the younger generation for the future growth in the U.S. And so the adoption rate, we're very happy with, and we look forward to continually improving and upgrading our personalization strategy to grow our sales in the U.S.

Great. And then, Dave, just a question about the stock price. I mean, if there's $80 million of free cash flow as a round number, you're trading about 6x that, and obviously you stepped up the buyback last quarter. What other kind of thoughts do you have, you and your board, about enhancing some value here?

We talked -- I mean, I've spent some time in the boardroom with all of the other CEOs from the other companies and looking at what's been happening and how we aren't being rewarded for our results, and so we're looking at all different ways to try and figure out how to stop this game and get our stock to what it should be. It's crazy. The more record results we put out, the lower it goes. So it's a different world, a different game and we've got to adapt and learn and figure out how to deal with this new environment.

[Operator Instructions] And our next question comes from the line of Tim Ramey with D.A. Davidson. Timothy S. Ramey - D.A. Davidson & Co., Research Division: So just a couple of other technical details, please. Any expected change in the tax rate for '13? I didn't hear you mention that. If I missed it, I apologize.

Well, we had a favorable tax year this year. We expect that we will be at about 33.5% in effective tax rate for 2013. Timothy S. Ramey - D.A. Davidson & Co., Research Division: 33.5%, okay. So that's a little bit lower then. I guess you had the one lower quarter this year, so maybe it's about the same. And then on the pricing initiative, Dave, you mentioned that it's going to be fewer markets and a lower magnitude. Can you give us some bracketing around that? You mentioned Canada, but does it touch every market because of the rebalancing? But...

It touches Canada, Australia and New Zealand. Canada is around a 10% decrease and Australia and New Zealand are about a 15% decrease. Those were the ones with currency exchange rates changing dramatically that really got out of whack and... Timothy S. Ramey - D.A. Davidson & Co., Research Division: Got it. Okay. So then I was intrigued by the new pay card comment. Can you flesh that out any more? What does that look like? Is it something that goes through, like a -- maybe it's a USANA-sponsored MasterCard or something like that or what does it look like?

Absolutely. We're very excited about that. Some of our markets, the people don't have credit cards. And without a credit card, you can't get on our autoship or auto process orders because you can't have a payment system in the computer. They pay by cash or other methods that aren't as automated. What we want to do is give them a card so that we can deposit their commissions onto their card or they can put cash onto that card and then we can have that card on file to process their monthly orders and charge them just so -- and it enables them to build their business easier because it gives them that automatic payment method. Timothy S. Ramey - D.A. Davidson & Co., Research Division: Does it flow through the interchange system? Or is it your own system?

I believe it's interchange.

Tim, it's a third party that we're using here, so all they do is partner with local processors and then go through there. Timothy S. Ramey - D.A. Davidson & Co., Research Division: Okay. And then just on this phenomenal growth in China, it truly has been spectacular. I think it, what, surpassed North America this quarter. And if we think back a year ago, you were seeing Hong Kong declining a little bit as per plan and BabyCare, what used to BabyCare, ramping up. Can you give us any sense of how that shift is playing forward? I suppose we'll read about it in the 10-K, but it'd helpful to get some color there.

The shift is continuing. We're liking what we're seeing and the region is doing great. They're building the business faster than anyone, as you see, and we're seeing that shift, so we're very excited. Timothy S. Ramey - D.A. Davidson & Co., Research Division: So I mean, we should assume that the Hong Kong Associates continued to decline as they did in '11 and the growth has been in mainland?

We're going to just -- we're going to focus on getting the growth in mainland. That's where our opportunity is and a ton of potential. So we're focusing our efforts on growing that area.

Maybe I'd just add to that. We've actually seen almost a 20% increase in active customers in the Greater China region, with the majority of that coming in China itself. So we're pretty excited about that.

Our next question comes from the line of Frank Camma with Sidoti & Company. Frank A. Camma - Sidoti & Company, LLC: Just a couple of quick questions. One is just -- do you mind if I clarify, make sure I have this right. So you're not expecting any continued buybacks in your guidance number, is that correct? You're using the 14.2 million share count outstanding?

That's correct. We have not built any share buyback into the model at this point. Frank A. Camma - Sidoti & Company, LLC: Okay, great. Okay. So over time, that may be revised as you buy back more shares?

Correct. We'll continue to look at that and determine what is the best way to return value to the shareholder and make those decisions at the time.

[indiscernible] effects [ph] are not included because we don't know where things will go, and so we don't know if it will be or not. This way we'll just leave it out as we give guidance, and then as things change, we'll update. Frank A. Camma - Sidoti & Company, LLC: Okay, great. Did you mention -- in your press release, you kind of hint at possibly ramping up capital expenditures, I guess bringing some production -- additional production in-house. Can you give us any range of what you expect the CapEx to be in the near term?

Yes. We typically, as you are aware, run about a $7 million to $10 million maintenance CapEx. In 2013, we anticipate that we'll be up around $20 million to $25 million CapEx, primarily with our investments into the China market. Frank A. Camma - Sidoti & Company, LLC: Great. Okay. And can you give us just a couple of specifics as a percentage of revenue on some of the larger markets and some of the faster growing ones, such as the Philippines and mainland China, specifically?

Yes. Let me take a look at some numbers to get it a little bit more accurate here. So I can make sure I'm giving you the right information. In our Asia Pacific area, which includes the Philippines, we saw a 27.2% increase. The Greater China region, we saw 20.1% increase in sales. So both of those markets are doing very strongly. We anticipate that we'll see continued trends in those markets. Frank A. Camma - Sidoti & Company, LLC: Okay. That's a growth rate. Can you just tell us roughly what the percent of revenue is?

The percent of revenue on that was 37.1% in the Greater China. Frank A. Camma - Sidoti & Company, LLC: Oh, no. I meant Mainland China?

Mainland -- as you're aware, we typically try and keep that regional, but mainland, we're at 4%. Frank A. Camma - Sidoti & Company, LLC: And the Philippines?

The Philippines, we are at about 7.5%. Frank A. Camma - Sidoti & Company, LLC: Great. Okay. And just a bigger picture question. So you have these price increases coming through in select markets. Can you tell us about how you see your pricing in, vis-à-vis, other markets such as for example, the U.S.? I mean, I think you instituted some nominal pricing increases in the U.S. recently, correct? And how do you, I mean, view that against the competition in the market?

Yes. The pricing initiative -- we have price decreases in a few of those markets, just to clarify. And in other markets, we have had small increases, just to stick with the raw material increases and the increased expenses. So we will continue every year to make sure that our markets are equally profitable. We want to create an environment where we don't care where the sales come from, they all have the same contribution to market -- margin. So we just work every year to make sure we maintain that. Frank A. Camma - Sidoti & Company, LLC: Okay, great. And a final question, if I could. What's -- how long does it take for this -- I know you're obviously getting the benefit of the price increases you instituted in some markets earlier, but how long does it take for the Lifetime Matching Bonus to kind of show up in your numbers? Is it -- I mean, is there a qualification period that we should look for where the rate is going to jump?

Frank, it's Doug. The Lifetime -- it's already been in there, it's fully in effect when we go back and do this, but because we allow people to go back and reach back 6 months with their history there, that -- their history will gradually build as time moves on. We don't see the Lifetime Match ever paying what the other match paid, so it gives us some additional flexibility to focus on local market incentives and promotions and contests. We still think it really promotes the long-term residual and good customer behavior that we want to see, though.

And I'm showing no further questions. I'll go ahead and turn it over for any closing remarks.

Thank you for your questions and for your participation on today's conference call. If you have any remaining questions, please feel free to contact Investor Relations at (801) 954-7961.

Thank you. Ladies and gentlemen, this does conclude today's conference call. If you'd like to listen to the replay, please dial 1 (800) 406-7325 or (303) 590-3030, enter 4591698. Thank you for your participation. You may now disconnect.