NATURES SUNSHINE PRODUCTS INC

Previous wording

Net sales related to Eastern Europe for the three and six months ended June 30, 2024 were $14.2 million and $28.9 million, respectively, compared to $14.6 million and $29.1 million for the same periods in 2023. Operating income related to Eastern Europe for the three and six months ended June 30, 2024 was $0.8 million and $2.3 million, respectively, compared to $0.3 million and $0.8 million for the same periods in 2023. As of June 30, 2024, Eastern Europe had assets of $6.7 million net of working capital reserves related to inventories.

Current wording

Net sales related to Eastern Europe for the three and nine months ended September 30, 2024 were $12.2 million and $41.1 million, respectively, compared to $12.1 million and $41.3 million for the same periods in 2023. Operating income related to Eastern Europe for the three and nine months ended September 30, 2024 was $0.5 million and $2.8 million, respectively, compared to $0.8 million and $1.6 million for the same periods in 2023. As of September 30, 2024, Eastern Europe had assets of $8.4 million net of working capital reserves related to inventories.

Previous wording

In the second quarter of 2024, we experienced a decrease in our consolidated net sales of 5.1 percent (or 2.6 percent in local currencies) compared to the same period in 2023. Asia net sales decreased approximately 8.9 percent (or 3.2 percent in local currencies) compared to the same period in 2023. Europe net sales increased approximately 1.7 percent (or 0.9 percent in local currencies) compared to the same period in 2023. North America net sales decreased approximately 3.2 percent (or 3.0 percent in local currencies) compared to the same period in 2023. Latin America and Other net sales decreased approximately 6.5 percent (or 7.6 percent in local currencies) compared to the same period in 2023. The strengthening of the U.S. dollar versus the local currencies, primarily in our Asian markets, resulted in an approximate 2.5 percent, or $3.0 million, decrease of our net sales during the quarter.

Current wording

In the third quarter of 2024, we experienced an increase in our consolidated net sales of 3.1 percent (or 4.2 percent in local currencies) compared to the same period in 2023. Asia net sales increased approximately 5.9 percent (or 8.6 percent in local currencies) compared to the same period in 2023. Europe net sales increased approximately 4.5 percent (or 2.9 percent in local currencies) compared to the same period in 2023. North America net sales decreased approximately 3.3 percent (or 3.2 percent in local currencies) compared to the same period in 2023. Latin America and Other net sales increased approximately 12.0 percent (or 14.5 percent in local currencies) compared to the same period in 2023. The strengthening of the U.S. dollar versus the local currencies, primarily in our Asian markets, resulted in an approximate 1.1 percent, or $1.3 million, decrease of our net sales during the quarter.

Previous wording

Cost of sales decreased $0.3 million during the three months ended June 30, 2024, compared to the same period in 2023, and as a percentage of net sales were 28.6 percent and 27.4 percent for the three months ended June 30, 2024 and 2023, respectively. The increase in cost of sales percentage is primarily due to increases related to higher inflation and unfavorable foreign exchange which offset our savings initiatives.

Current wording

Cost of sales increased $2.9 million during the three months ended September 30, 2024, compared to the same period in 2023, and as a percentage of net sales were 28.7 percent and 26.9 percent for the three months ended September 30, 2024 and 2023, respectively. The increase in cost of sales percentage is primarily due to higher inflation and unfavorable foreign exchange which offset our savings initiatives.

Previous wording

In absolute terms, selling, general and administrative expenses decreased $3.7 million during the three months ended June 30, 2024, compared to the same period in 2023, and as a percentage of net sales were 34.9 percent and 36.3 percent for the three months ended June 30, 2024 and 2023, respectively. The decrease was primarily related to the streamlining of our global overhead expenses and reduced service fees due to China's lower net sales.

Current wording

In absolute terms, selling, general and administrative expenses decreased $0.3 million during the three months ended September 30, 2024, compared to the same period in 2023, and as a percentage of net sales were 35.7 percent and 37.1 percent for the three months ended September 30, 2024 and 2023, respectively. The decrease was primarily related to the streamlining of our global overhead expenses and reduced service fees due to China's lower net sales.

Previous wording

The following table summarizes our unaudited consolidated operating results from continuing operations in U.S. dollars and as a percentage of net sales for the six months ended June 30, 2024 and 2023 (dollar amounts in thousands):

Current wording

The following table summarizes our unaudited consolidated operating results from continuing operations in U.S. dollars and as a percentage of net sales for the nine months ended September 30, 2024 and 2023 (dollar amounts in thousands):

Previous wording

The following table summarizes the changes in net sales by operating segment with a reconciliation to net sales excluding the impact of currency fluctuations for the six months ended June 30, 2024 and 2023 (dollar amounts in thousands):

Current wording

The following table summarizes the changes in net sales by operating segment with a reconciliation to net sales excluding the impact of currency fluctuations for the nine months ended September 30, 2024 and 2023 (dollar amounts in thousands):

Previous wording

Consolidated net sales for the three and six months ended June 30, 2024 were $110.6 million and $221.5 million, respectively, compared to $116.5 million and $225.2 million for the same period in 2023, which represents decreases of 5.1 percent and 1.6 percent, respectively. The decrease was primarily related to product sales declines in our Asia operating segment. Excluding the impact of foreign currency exchange rate fluctuations, consolidated net sales for the three and six months ended June 30, 2024 decreased 2.6 percent and increased 0.5 percent, respectively, from the same periods in 2023.

Current wording

Consolidated net sales for the three and nine months ended September 30, 2024 were $114.6 million and $336.2 million, respectively, compared to $111.2 million and $336.4 million for the same period in 2023, which represents an increase of 3.1 percent and a decrease of 0.1 percent, respectively. The increase for the three months ended September 30, 2024 was primarily related to product sales increases in our Asia and Europe operating segments. Excluding the impact of foreign currency exchange rate fluctuations, consolidated net sales for the three and nine months ended September 30, 2024 increased 4.2 percent and 1.7 percent, respectively, from the same periods in 2023.

Previous wording

In our Taiwan market, net sales increased $0.3 million and $1.8 million, or 1.7 percent and 6.2 percent, for the three and six months ended June 30, 2024, compared to the same periods in 2023. In local currencies, net sales for the three and six months ended June 30, 2024 increased 7.1 percent and 10.9 percent, compared to the same periods in 2023. We attribute the growth in net sales primarily to effective execution of fundamentals to accelerate customer acquisition.

Current wording

In our Taiwan market, net sales increased $2.8 million and $4.7 million, or 17.9 percent and 10.2 percent, for the three and nine months ended September 30, 2024, compared to the same periods in 2023. In local currencies, net sales for the three and nine months ended September 30, 2024 increased 20.4 percent and 14.1 percent, compared to the same periods in 2023. We attribute the growth in net sales primarily to effective execution of fundamentals to improve consultant activity.

Previous wording

In our South Korea market, net sales for the three months ended June 30, 2024 decreased $0.4 million or 2.8 percent, compared to the same period in 2023. Net sales remained flat for the six months ended June 30, 2024, compared to the same period in 2023. In local currency, net sales for the three and six months ended June 30, 2024 increased 1.4 percent and 4.3 percent, respectively, compared to the same periods in 2023. Net sales continued to show a modest improvement.

Current wording

In our South Korea market, net sales decreased $27,000 and $29,000, or 0.2 percent and 0.1 percent, for the three and nine months ended September 30, 2024, compared to the same periods in 2023. In local currency, net sales for the three and nine months ended September 30, 2024 increased 3.1 percent and 3.8 percent, respectively, compared to the same periods in 2023. Net sales continued to show a modest improvement in local currency due to improved customer acquisition.

Previous wording

In our Japan market, net sales decreased $1.4 million and $2.2 million, or 12.3 percent and 10.5 percent, for the three and six months ended June 30, 2024, respectively, compared to the same periods in 2023. In local currencies, net sales for the three and six months ended June 30, 2024 decreased 0.4 percent and increased 1.1 percent, respectively, compared to the same periods in 2023. The decrease in net sales was primarily the result of strong customer acquisition that was offset by lower average order values.

Current wording

In our Japan market, net sales increased $2.9 million and $0.7 million, or 28.1 percent and 2.3 percent, for the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023. In local currencies, net sales for the three and nine months ended September 30, 2024 increased 34.4 percent and 12.1 percent, respectively, compared to the same periods in 2023. The increase in net sales was primarily the result of strong customer acquisition that was bolstered by higher average order values.

Previous wording

In our China market, net sales decreased $3.6 million and $4.8 million, or 28.6 percent and 21.8 percent, for the three and six months ended June 30, 2024, respectively, compared to the same periods in 2023. In local currencies, net sales for the three and six months ended June 30, 2024 decreased 26.3 percent and 19.1 percent, respectively, compared to the same periods in 2023. The decrease in net sales was primarily the result of reduced activity resulting from challenging macroeconomic factors.

Current wording

In our China market, net sales decreased $2.4 million and $7.2 million, or 22.3 percent and 21.9 percent, for the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023. In local currencies, net sales for the three and nine months ended September 30, 2024 decreased 23.0 percent and 20.4 percent, respectively, compared to the same periods in 2023. The decrease in net sales was primarily the result of challenging macroeconomic factors.

Previous wording

Net sales related to Europe for the three and six months ended June 30, 2024 were $21.6 million and $43.9 million, respectively, compared to $21.2 million and $42.6 million for the same periods in 2023, or an increase of 1.7 percent and 2.9 percent, respectively. In local currency, net sales for the three and six months ended June 30, 2024 increased 0.9 percent and 1.4 percent, respectively, compared to the same periods in 2023. The functional currency for many of these markets is the U.S. Dollar which reduces the effect from foreign currency fluctuations. Fluctuations in foreign currency exchange rates had favorable impacts on net sales of $0.2 million and $0.7 million for the three and six months ended June 30, 2024, respectively. We attribute the increase in net sales in local currency primarily due to the increased focus on our field activation initiatives.

Current wording

Net sales related to Europe for the three and nine months ended September 30, 2024 were $19.6 million and $63.5 million, respectively, compared to $18.8 million and $61.4 million for the same periods in 2023, or increases of 4.5 percent and 3.4 percent, respectively. In local currency, net sales for the three and nine months ended September 30, 2024 increased 2.9 percent and 1.8 percent, respectively, compared to the same periods in 2023. The functional currency for many of these markets is the U.S. Dollar which reduces the effect from foreign currency fluctuations. Fluctuations in foreign currency exchange rates had favorable impacts on net sales of $0.3 million and $1.0 million for the three and nine months ended September 30, 2024, respectively. We attribute the increase in net sales in local currency primarily due to the increased focus on our field activation initiatives.

Previous wording

Net sales related to Asia for the three and six months ended June 30, 2024 were $50.0 million and $96.2 million, respectively, compared to $54.9 million and $101.2 million for the same periods in 2023, or decreases of 8.9 percent and 5.0 percent, respectively. In local currency, net sales for the three and six months ended June 30, 2024 decreased 3.2 percent and increased 0.6 percent, respectively, compared to the same periods in 2023.

Current wording

Net sales related to North America for the three and nine months ended September 30, 2024 were $33.6 million and $103.7 million, respectively, compared to $34.8 million and $104.1 million for the same periods in 2023, or decreases of 3.3 percent and 0.4 percent, respectively. In local currency, net sales for the three and nine months ended September 30, 2024 decreased 3.2 percent and 0.3 percent, respectively, compared to the same periods in 2023.

Previous wording

Net sales related to Latin America and Other markets for the three and six months ended June 30, 2024 were $5.4 million and $11.4 million, respectively, compared to $5.8 million and $12.0 million for the same periods in 2023, or decreases of 6.5 percent and 5.5 percent, respectively. In local currency, net sales for the three and six months ended June 30, 2024 decreased 7.6 percent and 7.8 percent, respectively, compared to the same periods in 2023. Fluctuations in foreign currency had favorable impacts on net sales of $0.1 million and $0.3 million for the three and six months ended June 30, 2024, respectively.

Current wording

Net sales related to Latin America and Other markets for the three months ended September 30, 2024 was $6.1 million compared to $5.4 million for the same period in 2023, an increase of 12.0 percent. For the nine months ended September 30, 2024 net sales remained flat, compared to the same period in 2023, at $17.4 million. In local currency, net sales for the three and nine months ended September 30, 2024 increased 14.5 percent and decreased 0.8 percent, respectively, compared to the same periods in 2023. Fluctuations in foreign currency had unfavorable impacts on net sales of $0.1 million and favorable impacts of $0.1 million for the three and nine months ended September 30, 2024, respectively.

Previous wording

Cost of sales as a percent of net sales was 28.6 percent and 28.7 percent for the three and six months ended June 30, 2024, compared to 27.4 percent and 28.3 percent for the same periods in 2023. The increase in cost of sales percentage is primarily due to increases related to higher inflation and unfavorable foreign exchange which offset our savings initiatives.

Current wording

Cost of sales as a percent of net sales was 28.7 percent and 28.7 percent for the three and nine months ended September 30, 2024, compared to 26.9 percent and 27.8 percent for the same periods in 2023. The increase in cost of sales percentage is primarily due to higher inflation and unfavorable foreign exchange which more than offset our savings initiatives.

Previous wording

Volume incentives expense as a percent of net sales was 31.4 percent and 30.8 percent for the three and six months ended June 30, 2024, respectively, compared to 30.3 percent and 30.4 percent for the same periods in 2023. The increase was primarily due to the timing of promotional incentives and changes in market mix. These payments are designed to provide incentives for reaching certain sales levels. Volume incentives vary slightly, on a percentage basis, by product due to pricing policies and commission plans in place in our various operations. We do not pay volume incentives in China, instead we pay independent service fees which are included in selling, general and administrative expenses. Volume incentives as a percentage of net sales can fluctuate based on the timing of promotional incentives and changes in market mix.

Current wording

Volume incentives expense as a percent of net sales was 31.0 percent and 30.9 percent for the three and nine months ended September 30, 2024, respectively, compared to 30.7 percent and 30.5 percent for the same periods in 2023. The increase was primarily due to the timing of promotional incentives and changes in market mix. These payments are designed to provide incentives for reaching certain sales levels. Volume incentives vary slightly, on a percentage basis, by product due to pricing policies and commission plans in place in our various geographies. We do not pay volume incentives in China, instead we pay independent service fees which are included in selling, general and administrative expenses.

Previous wording

Selling, general and administrative expenses decreased by $3.7 million and $6.6 million, respectively, to $38.6 million and $79.3 million for the three and six months ended June 30, 2024, respectively, compared to the same periods in 2023. Selling, general and administrative expenses were 34.9 percent and 35.8 percent of net sales for the three and six months ended June 30, 2024, compared to 36.3 percent and 38.2 percent for the same periods in 2023. The decrease was primarily related to the streamlining of our global overhead expenses and reduced service fees due to China's lower net sales.

Current wording

Selling, general and administrative expenses decreased $0.3 million and $6.9 million, respectively, to $41.0 million and $120.3 million for the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023. Selling, general and administrative expenses were 35.7 percent and 35.8 percent of net sales for the three and nine months ended September 30, 2024, compared to 37.1 percent and 37.8 percent for the same periods in 2023. The decrease was primarily related to the streamlining of our global overhead expenses and reduced service fees due to China's lower net sales.

Previous wording

Other income (loss), net, for the three and six months ended June 30, 2024, were losses of $1.2 million and $1.2 million, respectively, compared to loss of $1.1 million and income of $0.4 million during the same periods in 2023, respectively. Other income (loss), net for the three and six months ended June 30, 2024 primarily consisted of foreign exchange losses as a result of net changes in foreign currencies primarily in Asia.

Current wording

Other income (loss), net, for the three and nine months ended September 30, 2024, was income of $2.6 million and $1.4 million, respectively, compared to losses of $0.9 million and $0.5 million during the same periods in 2023, respectively. Other income (loss), net for the three and nine months ended September 30, 2024 primarily consisted of foreign exchange gains in Asia, partially offset by foreign exchange losses in Latin America, that resulted from net changes in foreign currencies.

Previous wording

For the three months ended June 30, 2024 and 2023, our provision for income taxes, as a percentage of income before income taxes was 66.4 percent and 55.0 percent, respectively, compared with a U.S. federal statutory rate of 21.0 percent. For the six months ended June 30, 2024 and 2023, our provision for income taxes, as a percentage of income before income taxes was 56.2 percent and 48.5 percent, respectively, compared with a U.S. federal statutory rate of 21.0 percent.

Current wording

For the three months ended September 30, 2024 and 2023, our provision for income taxes, as a percentage of income before income taxes was 41.2 percent and 35.9 percent, respectively, compared with a U.S. federal statutory rate of 21.0 percent. For the nine months ended September 30, 2024 and 2023, our provision for income taxes, as a percentage of income before income taxes was 49.2 percent and 43.6 percent, respectively, compared with a U.S. federal statutory rate of 21.0 percent.

Previous wording

The difference between the effective tax rate and the U.S. federal statutory tax rate for the three and six months ended June 30, 2024, was primarily attributed to operations in foreign countries which are treated as a branch for US tax purposes and current year foreign losses that presently do not provide future tax benefit, partially offset by foreign tax credits.

Current wording

The difference between the effective tax rate and the U.S. federal statutory tax rate for the three and nine months ended September 30, 2024, was primarily attributed to operations in certain foreign countries which are treated as a branch for US tax purposes and current year foreign losses that presently do not provide future tax benefit, partially offset by foreign tax credits.

Previous wording

The difference between the effective tax rate and the U.S. federal statutory tax rate for the three and six months ended June 30, 2023, was primarily attributed to tax liability related to foreign operations which are treated as a branch for US

Current wording

The difference between the effective tax rate and the U.S. federal statutory tax rate for the three and nine months ended September 30, 2023, was primarily attributed to adjustments relating to operations in foreign countries which are treated as a

Previous wording

tax purposes as well as recording a valuation allowance against deferred tax assets which were expected to expire before utilization.

Current wording

branch for US tax purposes as well as recording a valuation allowance against deferred tax assets which are expected to expire

Previous wording

The difference between the effective tax rate for the three and six months ended June 30, 2024, compared to June 30, 2023, is primarily caused by a decrease in the utilization of foreign tax credits in the current period.

Current wording

The difference between the effective tax rate for the three and nine months ended September 30, 2024, compared to September 30, 2023, is primarily caused by a decrease in the utilization of foreign tax credits in the current period.

Previous wording

As of June 30, 2024 and December 31, 2023, we have accrued $0.9 million and $0.3 million, respectively, related to unrecognized tax positions.

Current wording

As of September 30, 2024 and December 31, 2023, we had accrued $0.7 million and $0.3 million, respectively, related to unrecognized tax positions.

Previous wording

See Note 7, Segment Information, for a summary of the U.S. dollar amounts from the sale of general health, immune, cardiovascular, digestive, personal care and weight management products for the three and six months ended June 30, 2024 and 2023, by business segment.

Current wording

See Note 7, Segment Information, for a summary of the U.S. dollar amounts from the sale of general health, immune, cardiovascular, digestive, personal care and weight management products for the three and nine months ended September 30, 2024 and 2023, by business segment.

Previous wording

Our principal use of cash is to pay for operating expenses, including volume incentives, inventory and raw material purchases, capital assets and funding of international expansion. As of June 30, 2024, working capital was $88.4 million, compared to $89.1 million as of December 31, 2023. At June 30, 2024, we had $68.7 million in cash, of which $6.4 million was held in the U.S. and $62.3 million was held in foreign markets and may be subject to various withholding taxes and other restrictions related to repatriation before becoming available to be used along with the normal cash flows from operations to fund any unanticipated shortfalls in future cash flows.

Current wording

Our principal use of cash is to pay for operating expenses, including volume incentives, inventory and raw material purchases, capital assets and funding of international expansion. As of September 30, 2024, working capital was $96.4 million, compared to $89.1 million as of December 31, 2023. At September 30, 2024, we had $78.7 million in cash, of which $5.7 million was held in the U.S. and $73.0 million was held in foreign markets and may be subject to various withholding taxes and other restrictions related to repatriation before becoming available to be used along with the normal cash flows from operations to fund any unanticipated shortfalls in future cash flows.

Previous wording

For the six months ended June 30, 2024, operating activities provided cash of $3.5 million, compared to $17.3 million in the same period in 2023. Operating cash flows decreased primarily due to the timing of payments for accrued liabilities, lease liabilities, income taxes payable, and timing of receipts of accounts receivable.

Current wording

For the nine months ended September 30, 2024, operating activities provided cash of $13.1 million, compared to $31.6 million in the same period in 2023. Operating cash flows decreased primarily due to the timing of payments for accrued liabilities, lease liabilities, prepaid expenses, and timing of receipts of accounts receivable, partially offset by a reduction in inventories.

Previous wording

For the six months ended June 30, 2024, investing activities used $7.0 million, compared to $4.7 million for the same period in 2023, which consisted of capital expenditures related to the purchase of equipment, computer systems and software.

Current wording

For the nine months ended September 30, 2024, investing activities used $8.8 million, compared to $9.2 million for the same period in 2023, which consisted of capital expenditures related to the purchase of equipment, computer systems and software.

Previous wording

For the six months ended June 30, 2024, financing activities used $8.3 million, compared to $1.8 million in cash for the same period in 2023.

Current wording

For the nine months ended September 30, 2024, financing activities used $9.3 million, compared to $3.4 million for the same period in 2023.

Previous wording

During the six months ended June 30, 2024, we used cash to repurchase 453,000 shares of our common stock under the share repurchase program for $7.7 million. At June 30, 2024, the remaining balance available for repurchases under the program was $9.9 million.

Current wording

During the nine months ended September 30, 2024, we used cash to repurchase 509,000 shares of our common stock under the share repurchase program for $8.4 million. At September 30, 2024, the remaining balance available for repurchases under the program was $9.2 million.

Previous wording

We maintain a revolving credit agreement with Bank of America, N.A (the “Credit Agreement”), as well as a credit agreement with Banc of America Leasing and Capital, LLC (the "Capital Credit Agreement"). At June 30, 2024, there was no outstanding balances under the Credit Agreement or the Capital Credit Agreement. Our debt obligations are discussed in greater detail in Note 4, “Revolving Credit Facility and Other Obligations,” to our Condensed Consolidated Financial Statements in Item 1, Part 1 of this report.

Current wording

We maintain a revolving credit agreement with Bank of America, N.A (the “Credit Agreement”), as well as a credit agreement with Banc of America Leasing and Capital, LLC (the "Capital Credit Agreement"). At September 30, 2024, there were no outstanding balances under the Credit Agreement or the Capital Credit Agreement. Our debt obligations are discussed in greater detail in Note 4, “Revolving Credit Facility and Other Obligations,” to our Condensed Consolidated Financial Statements in Item 1, Part 1 of this report.