Log in
Log in
Or log in with
GoogleGoogle
Twitter Twitter
Facebook Facebook
Apple Apple     
Sign up
Or log in with
GoogleGoogle
Twitter Twitter
Facebook Facebook
Apple Apple     

NATURE'S SUNSHINE PRODUCTS, INC.

(NATR)
  Report
Delayed Nasdaq  -  04:00 2022-12-08 pm EST
8.580 USD   +0.47%
12/07Natures Sunshine Products Inc : Change in Directors or Principal Officers, Financial Statements and Exhibits (form 8-K)
AQ
12/07Nature's Sunshine Products, Inc. Appoints Shane Jones as Executive Vice President, Effective December 30, 2022
CI
12/07Nature's Sunshine Products, Inc. Appoints Shane Jones as Chief Financial Officer, effective December 30, 2022
CI
SummaryQuotesChartsNewsRatingsCalendarCompanyFinancialsConsensusRevisionsFunds 
SummaryMost relevantAll NewsAnalyst Reco.Other languagesPress ReleasesOfficial PublicationsSector news

NATURES SUNSHINE PRODUCTS INC MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

05/05/2022 | 05:23pm EST
The following Management's Discussion and Analysis should be read in conjunction
with the unaudited condensed consolidated financial statements and notes thereto
included in this report, as well as the consolidated financial statements, the
notes thereto, and management's discussion and analysis included in our Annual
Report on Form 10-K for the year ended December 31, 2021, and our other reports
filed since the date of such Form 10-K.

OVERVIEW


We are a natural health and wellness company primarily engaged in the
manufacture and sale of nutritional and personal care products. We are a Utah
corporation with our principal place of business in Lehi, Utah, and sell our
products to a sales force of independent consultants who use the products
themselves or resell them to consumers.

Our independent consultants market and sell our products to customers and
sponsor other independent consultants who also market our products to customers.
Our sales are highly dependent upon the number and productivity of our
independent consultants. Growth in sales volume generally requires an increase
in the productivity of our independent consultants and/or growth in the total
number of independent consultants. We seek to motivate and provide incentives to
our independent consultants by offering high quality products and providing
independent consultants with product support, training seminars, sales
conventions, travel programs and financial incentives.

In or about December 2019, a novel strain of coronavirus, SARS-CoV-2 "COVID-19",
began aggressively spreading throughout the world, including all the primary
markets where we conduct business. As COVID-19 has spread throughout the world,
it has impacted our markets differently. At various times during the course of
the pandemic and throughout our markets, governments have issued orders and
restrictions that have limited the ability of our consultants to meet with
consumers, put downward pressure on our sales in many of our markets and added
substantial uncertainties to our global supply chain. We continue to take
actions to mitigate the effects COVID-19 may have on our business, such actions
may ultimately be insufficient to avoid substantial impact on the consolidated
financial statement or material health of the Company. At this time, the
duration of any business disruption and related financial impact cannot be
reasonably estimated.

On February 24, 2022, Russian forces launched significant military action
against Ukraine, and sustained conflict and disruption in the region is likely.
In response to the ongoing conflict in Ukraine, we have currently suspended the
shipment of products to Russia. However, our consultants in our Russia and Other
market, a market within our Europe business segment that includes Russia,
Ukraine, Belarus and other Common Independent States in the region, continue to
operate their independent businesses, albeit at a reduced level than prior to
the start of the conflict. We have recorded a pretax charge of $3.1 million in
the first quarter of 2022, primarily related to the impairment of inventory, as
well as accruals for contractual obligations related to Russian operations. We
expect that this will continue to impact our business for the foreseeable
future. We will continue monitoring the social, political, regulatory and
economic environment in Ukraine and Russia, and will consider further actions as
appropriate.

For the year ended December 31, 2021, Russia and Other had net sales and
operating income of $61.4 million and $5.8 million, respectively. For the three
months ended March 31, 2022, net sales were $14.5 million and operating income
was $1.2 million, prior to the charges noted above. As of March 31, 2022, Russia
and Other had assets of $4.2 million which primarily consisted of inventories.

More broadly, there could be additional negative impacts to our net sales,
earnings and cash flows should the situation escalate beyond its current scope,
including, among other potential impacts, economic recessions in certain
neighboring countries or globally due to inflationary pressures and supply chain
cost increases or the geographic proximity of the war relative to the rest of
Europe.

In 2021, the inflation rate in the U.S. began to increase significantly. In
2022, the inflation rate increase accelerated and during the three months ended
March 31, 2022, was the highest in 40 years. Our operations can be adversely
impacted by inflation, primarily from higher costs of raw materials, labor,
production and transportation costs.

In the first quarter of 2022, we experienced an increase in our consolidated net
sales of 7.9 percent (or 10.3 percent in local currencies) compared to the same
period in 2021. Asia net sales increased approximately 29.0 percent (or 34.1
percent in local currencies) compared to the same period in 2021. Europe net
sales decreased approximately 1.9 percent (or increased 0.6 percent in local
currencies) compared to the same period in 2021. North America net sales
decreased approximately 4.7 percent
                                       21
--------------------------------------------------------------------------------
  Table of Contents
(or 4.7 percent in local currencies) compared to the same period in 2021. Latin
America and Other net sales decreased approximately 1.2 percent (or 0.2 percent
in local currencies) compared to the same period in 2021. The strengthening of
the U.S. dollar versus the local currencies, primarily in our Asian and European
markets, resulted in an approximate 2.4 percent, or $2.5 million, decrease of
our net sales during the quarter.

Cost of sales increased $7.5 million during the three months ended March 31,
2022, compared to the same period in 2021, and as a percentage of net sales were
31.2 and 26.3 percent for the three months ended March 31, 2022 and 2021,
respectively. The increase in cost of sales percentage is primarily due to
changes in inventory valuation reserves as a result of the conflict between
Russia and Ukraine, as well as reserves for other markets, changes in market
mix, persistent inflation, and increases in raw materials, production and
transportation costs. For the three months ended March 31, 2022, we had
incremental valuation charges of $4.2 million related to inventory. Of that
amount $3.1 million related to the conflict between Russia and Ukraine, and
$1.1 million related to changes in forecast demand and production issues, among
other factors.

In absolute terms, selling, general and administrative expenses increased $7.1
million during the three months ended March 31, 2022, compared to the same
period in 2021, and as a percentage of net sales were 36.8 percent and 32.8
percent for the three months ended March 31, 2022 and 2021, respectively. The
dollar increase in selling, general and administrative expenses was primarily
related to higher service fees that resulted from growth in China's net sales,
increased selling costs and direct marketing spend intended to drive growth,
increase in expected level of convention and distributor events, as well as
growth in markets with higher variable costs.

As an international business, we have significant sales and costs denominated in
currencies other than the U.S. Dollar. Sales in international markets
denominated in foreign currencies are expected to continue to represent a
substantial portion of our sales. Likewise, we expect foreign markets with
functional currencies other than the U.S. Dollar will continue to represent a
substantial portion of our overall sales and related operating expenses.
Accordingly, changes in foreign currency exchange rates could materially affect
sales and costs or the comparability of sales and costs from period to period as
a result of translating foreign markets financial statements into our reporting
currency.

RESULTS OF OPERATIONS

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
three months ended March 31, 2022 and 2021 (dollar amounts in thousands):


                                             Three Months Ended                            Three Months Ended
                                               March 31, 2022                                March 31, 2021                                    Change
                                       Total               Percent of                Total               Percent of               Total
                                      dollars               net sales               dollars               net sales              dollars             Percentage
Net sales                          $  110,494                     100.0  %       $  102,421                     100.0  %       $  8,073                        7.9  %
Cost of sales                          34,460                      31.2              26,979                      26.3             7,481                       27.7
Gross profit                           76,034                      68.8              75,442                      73.7               592                        0.8
Volume incentives                      34,102                      30.9              34,255                      33.4              (153)                      (0.4)
SG&A expenses                          40,623                      36.8              33,552                      32.8             7,071                       21.1
Operating income                        1,309                       1.2               7,635                       7.5            (6,326)                     (82.9)
Other loss, net                          (314)                     (0.3)             (1,933)                     (1.9)            1,619                       83.8
Income before income taxes                995                       0.9               5,702                       5.6            (4,707)                     (82.5)
Provision for income taxes              3,681                       3.3               1,550                       1.5             2,131                      137.5
Net income (loss)                  $   (2,686)                     (2.4) %       $    4,152                       4.1  %       $ (6,838)                    (164.7) %



                                       22

--------------------------------------------------------------------------------

Table of Contents

Net Sales


International operations have provided, and are expected to continue to provide,
a significant portion of our total net sales. As a result, total net sales will
continue to be affected by fluctuations in the U.S. dollar against foreign
currencies. In order to provide a framework for assessing how our underlying
businesses performed excluding the effect of foreign currency fluctuations, in
addition to comparing the percent change in net sales from one period to another
in U.S. dollars, we present net sales excluding the impact of foreign exchange
fluctuations. We compare the percentage change in net sales from one period to
another period by excluding the effects of foreign currency exchange as shown
below. Net sales excluding the impact of foreign exchange fluctuations is not a
U.S. GAAP financial measure and removes from net sales in U.S. dollars the
impact of changes in exchange rates between the U.S. dollar and the functional
currencies of our foreign subsidiaries, by translating the current period net
sales into U.S. dollars using the same foreign currency exchange rates that were
used to translate the net sales for the previous comparable period. We believe
presenting the impact of foreign currency fluctuations is useful to investors
because it allows a more meaningful comparison of net sales of our foreign
operations from period to period. However, net sales excluding the impact of
foreign currency fluctuations should not be considered in isolation or as an
alternative to net sales in U.S. dollar measures that reflect current period
exchange rates, or to other financial measures calculated and presented in
accordance with U.S. GAAP. Throughout the last five years, foreign currency
exchange rates have fluctuated significantly. See Item 3. Quantitative and
Qualitative Disclosures about Market Risk.

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 three months ended March 31, 2022 and 2021 (dollar amounts in
thousands):
                                                                         

Net Sales by Operating Segment

                                                                                                                               Percent
                                                            Three Months                                                        Change
                                       Three Months             Ended                                   Impact of             Excluding
                                          Ended               March 31,             Percent              Currency             Impact of
                                      March 31, 2022            2021                 Change              Exchange              Currency
Asia                                 $      46,110          $   35,755                   29.0  %       $  (1,850)                    34.1  %
Europe                                      21,777              22,200                   (1.9)              (554)                     0.6
North America                               35,981              37,762                   (4.7)                (1)                    (4.7)
Latin America and Other                      6,626               6,704                   (1.2)               (62)                    (0.2)
                                     $     110,494          $  102,421                    7.9  %       $  (2,467)                    10.3  %



Consolidated net sales for the three months ended March 31, 2022 and 2021, were
$110.5 million and $102.4 million, respectively, which represents an increase of
7.9 percent. The increase for the three months ended March 31, 2022, was
primarily related to notable product sales growth in our Asia operating segment.
Excluding the impact of foreign currency exchange rate fluctuations,
consolidated net sales for the three months ended March 31, 2022, increased 10.3
percent from the same period in 2021.

Asia


Net sales related to Asia for the three months ended March 31, 2022 and 2021,
were $46.1 million and $35.8 million, respectively, or an increase of 29.0
percent. In local currency, net sales for the three months ended March 31, 2022,
increased 34.1 percent compared to the same period in 2021. Fluctuations in
foreign exchange rates had an unfavorable impact on net sales of $1.9 million
for the three months ended March 31, 2022.
Notable activity in the following markets contributed to the results of Asia:

In our South Korea market, net sales decreased $1.2 million, or 7.8 percent, for
the three months ended March 31, 2022, compared to the same period in 2021. In
local currency, net sales for the three months ended March 31, 2022, decreased
0.3 percent, compared to the same period in 2021.

In our Japan market, net sales increased $1.6 million, or 20.9 percent, for the
three months ended March 31, 2022, compared to the same period in 2021. In local
currencies, net sales for the three months ended March 31, 2022, increased 32.6
percent, compared to the same period in 2021. We attribute the growth in net
sales primarily to product promotions intended to stimulate activity as well as
an increase in demand for nutritional supplements.

                                       23
--------------------------------------------------------------------------------
  Table of Contents
In our China market, net sales increased $4.0 million, or 48.2 percent, for the
three months ended March 31, 2022, compared to the same period in 2021. In local
currencies, net sales for the three months ended March 31, 2022, increased 45.8
percent, compared to the same period in 2021. We attribute the growth in net
sales primarily to initiatives designed to increase independent service
providers' engagement levels and gain market share. During March 2022, the
government has instituted additional restrictions in the market intended to slow
the spread of COVID-19, that may impact our sales activities during the rest of
2022.

In our Taiwan market, net sales increased $7.0 million, or 252.2 percent, for
the three months ended March 31, 2022, compared to the same period in 2021. In
local currencies, net sales for the three months ended March 31, 2022, increased
251.0 percent, compared to the same period in 2021. We attribute the growth in
net sales primarily to product promotions intended to stimulate activity as well
as an increase in demand for nutritional supplements.

Europe


Net sales related to Europe for the three months ended March 31, 2022, were
$21.8 million, compared to $22.2 million for the same period in 2021, or a
decrease of 1.9 percent. In local currency, net sales for the three months ended
March 31, 2022, increased 0.6 percent, compared to the same period in 2021. The
functional currency for many of these markets is the U.S. Dollar which reduces
the effect from foreign currency fluctuations. Fluctuations in foreign exchange
rates had an unfavorable impact on net sales of $0.6 million for the three
months ended March 31, 2022.

North America


Net sales related to North America for the three months ended March 31, 2022,
were $36.0 million, compared to $37.8 million for the same period in 2021, or a
decrease of 4.7 percent. In local currency, net sales for the three months ended
March 31, 2022, decreased 4.7 percent, compared to the same period in 2021.

In the United States, net sales decreased $1.7 million, or 4.8 percent, for the
three months ended March 31, 2022, respectively, compared to the same period in
2021. The decrease in sales is due primarily to stock outs of certain products
as a result of supply chain challenges, and a reduction in the average order
size attributed to customer sensitivity due to inflationary pressures, among
other factors.

Latin America and Other

Net sales related to Latin America and Other markets for the three months ended
March 31, 2022, were $6.6 million, compared to $6.7 million for the same period
in 2021, or a decrease of 1.2 percent, respectively. In local currency, net
sales for the three months ended March 31, 2022, decreased 0.2 percent, compared
to the same period in 2021. Fluctuations in foreign currency had unfavorable
impacts on net sales of $0.1 million for the three months ended March 31, 2022.

Further information related to our Asia, Europe, North America, and Latin America and Other business segments is set forth in Note 7 to the Unaudited Condensed Consolidated Financial Statements in Part 1, Item 1 of this report.

Cost of Sales


Cost of sales as a percent of net sales was 31.2 percent for the three months
ended March 31, 2022, compared to 26.3 percent for the same period in 2021. The
increase in cost of sales percentage is primarily due to changes in inventory
valuation reserves as a result of the conflict between Russia and Ukraine, as
well as reserves for other markets, changes in market mix, persistent inflation,
and increases in raw materials, production and transportation costs. For the
three months ended March 31, 2022, we had incremental valuation charges of
$4.2 million related to inventory. Of that amount $3.1 million related to the
conflict between Russia and Ukraine, and $1.1 million related to changes in
forecast demand and production issues, among other factors.

                                       24
--------------------------------------------------------------------------------
  Table of Contents
Volume Incentives

Volume incentives expense as a percent of net sales was 30.9 percent for the
three months ended March 31, 2022, respectively, compared to 33.4 percent for
the same period in 2021. 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 promotional activity and mix of sales by market. The decrease
in volume incentives as a percent of net sales is primarily due to change in
market mix, reflecting growth in markets where volume incentives as a percentage
of net sales are lower than the consolidated average, and the growth in NSP
China. The decrease also reflects cost savings from the September 2020 launch of
our new consultant sales and compensation plan in North America and LATAM.

Selling, General and Administrative


Selling, general and administrative expenses represent operating expenses,
components of which include labor and benefits, sales events, professional fees,
travel and entertainment, marketing, occupancy costs, communications costs, bank
fees, depreciation and amortization, independent services fees paid in China,
and other miscellaneous operating expenses.

Selling, general and administrative expenses increased by $7.1 million, to $40.6
million for the three months ended March 31, 2022, compared to the same period
in 2021. Selling, general and administrative expenses were 36.8 percent of net
sales for the three months ended March 31, 2022, compared to 32.8 percent for
the same period in 2021. The dollar increase in selling, general and
administrative expenses was primarily related to higher service fees that
resulted from growth in China's net sales, increased selling costs and direct
marketing spend intended to drive growth, increase in expected level of
convention and distributor events, as well as growth in markets with higher
variable costs.

Other Loss, Net


Other loss, net, for the three months ended March 31, 2022, was $0.3 million,
compared to $1.9 million during the same period in 2021. Other loss, for the
three months ended March 31, 2022 and 2021 primarily consisted of foreign
exchange gains and losses as a result of overall unfavorable net changes in
foreign currencies primarily in Asia, Europe and Latin America.

Income Taxes


For the three months ended March 31, 2022 and 2021, our provision for income
taxes, as a percentage of income before income taxes was 369.9 percent and 27.2
percent, respectively, compared with a U.S. federal statutory rate of 21.0
percent.

The large increase in the rate for the current period is primarily attributed to
recording a valuation allowance against deferred tax assets which are expected
to expire before utilization. The current conflict between Russia and Ukraine
has created significant uncertainty in our ability to utilize existing foreign
tax credits. The carryforward period for many of these existing credits expires
in 2024. This is a matter which requires significant accounting estimates and
actual results could differ from these estimates.

Product Categories


Our line of over 700 products includes several product classifications, such as
immune, cardiovascular, digestive, personal care, weight management and other
general health products. We purchase herbs and other raw materials in bulk, and
after rigorous quality control testing, we formulate, encapsulate, tablet or
concentrate them, label and package them for shipment. Most of our products are
manufactured at our facility in Spanish Fork, Utah. Contract manufacturers
produce some of our products in accordance with our specifications and
standards. We have implemented stringent quality control procedures to verify
that our contract manufacturers have complied with our specifications and
standards.

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 months ended March 31, 2022 and 2021,
by business segment.

                                       25
--------------------------------------------------------------------------------
  Table of Contents
Distribution and Marketing

We market our products primarily through our network of independent consultants,
who market our products to customers through direct selling techniques and
sponsor other independent consultants who also market our products to customers.
We seek to motivate and provide incentives to our independent consultants by
offering high quality products and providing independent consultants with
product support, training seminars, sales conventions, travel programs and
financial incentives.

Our products sold in the United States are shipped directly from our
manufacturing and warehouse facilities located in Spanish Fork, Utah, as well as
from our regional warehouses located in Georgia, Ohio and Texas. Many of our
international operations maintain warehouse facilities and inventory to supply
their independent consultants. However, in foreign markets where we do not
maintain warehouse facilities, we have contracted with third-parties to
distribute our products and provide support services to our force of independent
consultants.

In the United States, we generally sell our products on a cash or credit card
basis. From time to time, our U.S. operations extend short-term credit
associated with product promotions. For certain of our international operations,
we use independent distribution centers and offer credit terms that are
generally consistent with industry standards within each respective country.

We pay sales commissions, or "volume incentives" to our independent consultants
based upon their own product sales and the product sales of their sales
organization. As an exception, in NSP China, we do not pay volume incentives;
rather, we pay independent service fees, which are included in selling, general
and administrative expenses. These volume incentives are recorded as an expense
in the year earned. The amounts of volume incentives that we expensed during the
quarters ended March 31, 2022 and 2021, are set forth in the Condensed
Consolidated Financial Statements in Item 1 of this report. In addition to the
opportunity to receive volume incentives, independent consultants who attain
certain levels of monthly product sales are eligible for additional incentive
programs including automobile allowances, sales convention privileges and travel
awards.

LIQUIDITY AND CAPITAL RESOURCES


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 March 31, 2022, working capital was $80.3
million, compared to $88.0 million as of December 31, 2021. At March 31, 2022,
we had $66.5 million in cash, of which $8.5 million was held in the U.S. and
$58.0 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.

Our net consolidated cash inflows (outflows) are as follows (in thousands):

                               Three Months Ended March 31,
                                    2022                    2021
Operating activities   $         (7,924)                  $ 2,735
Investing activities             (1,518)                     (983)
Financing activities             (9,374)                   (1,311)



Operating Activities

For the three months ended March 31, 2022, operating activities used cash of
$7.9 million, compared to providing cash of $2.7 million in the same period in
2021. Operating cash flows decreased primarily due to increased inventory
purchases before any changes in reserves and timing of payments on accounts
payable and accrued liabilities partially offset by the timing of receivable
payments.

Investing Activities

For the three months ended March 31, 2022, investing activities used $1.5
million, compared to $1.0 million for the same period in 2021. Capital
expenditures related to the purchase of equipment, computer systems and software
for the three months ended March 31, 2022 and 2021, were $1.5 million and $1.0
million, respectively.

                                       26
--------------------------------------------------------------------------------
  Table of Contents
Financing Activities

For the three months ended March 31, 2022, financing activities used $9.4 million, compared to providing $1.3 million in cash for the same period in 2021.


During the three months ended March 31, 2022, we used cash to repurchase 451,000
shares of our common stock under the share repurchase program for $8.0 million.
At March 31, 2022, the remaining balance available for repurchases under the
program was $29.6 million.

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"). During the three months ended
March 31, 2022, we made no additional borrowings from either agreement. At
March 31, 2022, there was no outstanding balance under the Credit Agreement.
During the three months ended March 31, 2022 we made monthly payments of
$0.1 million pursuant to the Capital Credit Agreement. As of March 31, 2022,
there was $2.1 million outstanding balance under the Capital Credit Agreement,
$1.3 million of which was classified as current. 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.

We believe that cash generated from operations, along with available cash and cash equivalents, will be sufficient to fund our normal operating needs, including capital expenditures, on both a short- and long-term basis.

Events, such as a prolonged economic downturn, an increase in geopolitical issues, a decrease in demand for our products, an unfavorable settlement of our unrecognized tax positions or non-income tax contingencies could adversely affect our long-term liquidity.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES


Our consolidated financial statements have been prepared in accordance with U.S.
GAAP and form the basis for the following discussion and analysis on critical
accounting policies and estimates. The preparation of these financial statements
requires us to make estimates and assumptions that affect the reported amounts
of assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities. On a regular basis, we evaluate our estimates
and assumptions. We base our estimates on historical experience and on various
other assumptions that are believed to be reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other
sources. Actual results could differ from these estimates and those differences
could have a material effect on our financial position and results of
operations. We have discussed the development, selection and disclosure of these
estimates with the Board of Directors and our Audit Committee.

A summary of our significant accounting policies is provided in Note 1 of the
Notes to Consolidated Financial Statements in Item 8 of the Annual Report on
Form 10-K for the year ended December 31, 2021. We believe the critical
accounting policies and estimates described below reflect our more significant
estimates and assumptions used in the preparation of the consolidated financial
statements. The impact and any associated risks on our business that are related
to these policies are also discussed throughout this "Management's Discussion
and Analysis of Financial Condition and Results of Operations" where such
policies affect reported and expected financial results.

Revenue Recognition

Our revenue recognition practices are discussed in Note 12, "Revenue Recognition," to our Condensed Consolidated Financial Statements in Item 1, Part 1 of this report.


Inventories

Inventories are adjusted to lower of cost and net realizable value, using the
first-in, first-out method. The components of inventory cost include raw
materials, labor and overhead. To estimate any necessary adjustments, various
assumptions are made in regard to excess or slow-moving inventories,
non-conforming inventories, expiration dates, current and future product demand,
production planning and market conditions. If future demand and market
conditions are less favorable than our assumptions, additional inventory
adjustments could be required.

                                       27
--------------------------------------------------------------------------------
  Table of Contents
Incentive Trip Accrual

We accrue for expenses associated with our direct sales program, which rewards
independent consultants with paid attendance for incentive trips, including our
conventions and meetings. Expenses associated with incentive trips are accrued
over qualification periods as they are earned. We specifically analyze incentive
trip accruals based on historical and current sales trends as well as
contractual obligations when evaluating the adequacy of the incentive trip
accrual. Actual results could generate liabilities more or less than the amounts
recorded.

Contingencies

We are involved in certain legal proceedings and disputes. When a loss is
considered probable in connection with litigation or non-income tax
contingencies and when such loss can be reasonably estimated with a range, we
record our best estimate within the range related to the contingency. If there
is no best estimate, we record the minimum of the range. As additional
information becomes available, we assess the potential liability related to the
contingency and revise the estimates. Revision in estimates of the potential
liabilities could materially affect our results of operations in the period of
adjustment. Our contingencies are discussed in further detail in Note 10,
"Commitments and Contingencies", to the Notes of our Condensed Consolidated
Financial Statements, of Item 1, Part 1 of this report.

Income Taxes


Our provision for income taxes, deferred tax assets and liabilities and
contingent reserves reflect management's best assessment of estimated future
taxes to be paid. We are subject to income taxes in both the United States and
numerous foreign jurisdictions. Significant judgments and estimates are required
in determining our consolidated provision for income taxes.

Deferred income taxes arise from temporary differences between the tax and
financial statement recognition of revenue and expense. In evaluating our
ability to recover our deferred tax assets, management considers all available
positive and negative evidence, including scheduled reversals of deferred tax
liabilities, projected future taxable income, tax planning strategies and recent
financial operations. In projecting future taxable income, we develop
assumptions including the amount of future state, federal and foreign pretax
operating income, the reversal of temporary differences, and the implementation
of feasible and prudent tax planning strategies. These assumptions require
significant judgment about the forecasts of future taxable income, and are
consistent with the plans and estimates that we are using to manage the
underlying businesses. Valuation allowances are recorded as reserves against net
deferred tax assets by us when it is determined that net deferred tax assets are
not likely to be realized in the foreseeable future.

Changes in tax laws and rates could also affect recorded deferred tax assets and liabilities in the future. Management is not aware of any such changes that would have a material effect on our results of operations, cash flows or financial position.


The calculation of our tax liabilities involves dealing with uncertainties in
the application of complex tax laws and regulations in a multitude of
jurisdictions across our global operations. Income tax positions must meet a
more-likely-than-not recognition threshold to be recognized.

© Edgar Online, source Glimpses

All news about NATURE'S SUNSHINE PRODUCTS, INC.
12/07Natures Sunshine Products Inc : Change in Directors or Principal Officers, Financial State..
AQ
12/07Nature's Sunshine Products, Inc. Appoints Shane Jones as Executive Vice President, Effe..
CI
12/07Nature's Sunshine Products, Inc. Appoints Shane Jones as Chief Financial Officer, effec..
CI
12/06Nature's Sunshine Names Shane Jones as Chief Financial Officer
PR
12/06Nature's Sunshine Names Shane Jones as Chief Financial Officer
CI
11/21Nature's Sunshine CEO Terrence Moorehead Receives 2022 CEO Today USA Award
PR
11/03Nature's Sunshine : Q3 Earnings Snapshot
AQ
11/03NATURES SUNSHINE PRODUCTS INC MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDIT..
AQ
11/03Tranche Update on Nature's Sunshine Products, Inc.'s Equity Buyback Plan announced on M..
CI
11/03Nature's Sunshine Products, Inc. Reports Earnings Results for the Third Quarter and Nin..
CI
More news
Analyst Recommendations on NATURE'S SUNSHINE PRODUCTS, INC.
More recommendations