XNAS:NATR Natures Sunshine Products Inc Quarterly Report 10-Q Filing - 6/30/2012

Effective Date 6/30/2012

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Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 10-Q

 

(Mark One)

 

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2012

 

OR

 

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                          to                         .

 

Commission File Number:  0-8707

 

 

NATURE’S SUNSHINE PRODUCTS, INC.

(Exact name of Registrant as specified in its charter)

 

Utah

 

87-0327982

(State or other jurisdiction of

 

(IRS Employer

incorporation or organization)

 

Identification No.)

 

2500 West Executive Parkway, Suite 100

Lehi, Utah 84043

(Address of principal executive offices and zip code)

 

(801) 341-7900

(Registrant’s telephone number including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one).

 

Large accelerated filer o

 

Accelerated filer x

 

 

 

Non-accelerated filer o

 

Smaller reporting company o

(Do not check if a smaller reporting company)

 

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes o No x.

 

The number of shares of Common Stock, no par value, outstanding on July 27, 2012 was 15,609,676 shares.

 

 

 



Table of Contents

 

NATURE’S SUNSHINE PRODUCTS, INC.

FORM 10-Q

 

For the Quarter Ended June 30, 2012

 

Table of Contents

 

Part I. Financial Information

 

 

 

 

 

 

Item 1.

Financial Statements (Unaudited)

3

 

 

 

 

 

 

Condensed Consolidated Balance Sheets

3

 

 

Condensed Consolidated Statements of Operations

4

 

 

Condensed Consolidated Statements of Comprehensive Income

4

 

 

Condensed Consolidated Statements of Cash Flows

6

 

 

Notes to Condensed Consolidated Financial Statements

7

 

 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

16

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

29

 

 

 

 

 

Item 4.

Controls and Procedures

32

 

 

 

 

Part II. Other Information

 

 

 

 

 

 

Item 1.

Legal Proceedings

32

 

 

 

 

 

Item 1A.

Risk Factors

32

 

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

33

 

 

 

 

 

Item 3.

Defaults Upon Senior Securities

33

 

 

 

 

 

Item 4.

Mine Safety Disclosures

33

 

 

 

 

 

Item 5.

Other Information

33

 

 

 

 

 

Item 6.

Exhibits

33

 

2



Table of Contents

 

PART I FINANCIAL INFORMATION

 

Item 1.  FINANCIAL STATEMENTS

 

NATURE’S SUNSHINE PRODUCTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands)

(Unaudited)

 

 

 

June 30,
2012

 

December 31,
2011

 

Assets

 

 

 

 

 

Current Assets:

 

 

 

 

 

Cash and cash equivalents

 

$

66,353

 

$

58,969

 

Accounts receivable, net of allowance for doubtful accounts of $692 and $647, respectively

 

10,509

 

9,868

 

Investments available for sale

 

2,280

 

5,677

 

Inventories

 

42,752

 

41,611

 

Deferred income tax assets

 

4,355

 

4,395

 

Prepaid expenses and other

 

5,361

 

4,583

 

Total current assets

 

131,610

 

125,103

 

 

 

 

 

 

 

Property, plant and equipment, net

 

25,818

 

25,137

 

Investment securities

 

1,346

 

1,429

 

Intangible assets, net

 

1,077

 

1,151

 

Deferred income tax assets

 

16,623

 

16,576

 

Other assets

 

6,285

 

6,415

 

 

 

$

182,759

 

$

175,811

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

Accounts payable

 

$

5,499

 

$

5,980

 

Accrued volume incentives

 

19,517

 

19,326

 

Accrued liabilities

 

26,919

 

27,938

 

Deferred revenue

 

3,008

 

2,603

 

Current installments of long-term debt

 

3,320

 

3,296

 

Income taxes payable

 

3,820

 

8,655

 

Total current liabilities

 

62,083

 

67,798

 

 

 

 

 

 

 

Liability related to unrecognized tax benefits

 

9,784

 

10,426

 

Long-term debt

 

4,232

 

5,894

 

Deferred compensation payable

 

1,346

 

1,429

 

Other liabilities

 

2,753

 

2,826

 

Total long-term liabilities

 

18,115

 

20,575

 

 

 

 

 

 

 

Commitments and Contingencies (Note 10)

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ Equity:

 

 

 

 

 

Common stock, no par value; 50,000 shares authorized, 15,609 and 15,569 shares issued and outstanding as of June 30, 2012 and December 31, 2011, respectively

 

73,351

 

71,628

 

Retained earnings

 

39,613

 

25,879

 

Accumulated other comprehensive loss

 

(10,403

)

(10,069

)

Total shareholders’ equity

 

102,561

 

87,438

 

 

 

$

182,759

 

$

175,811

 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

3



Table of Contents

 

NATURE’S SUNSHINE PRODUCTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except per share information)

(Unaudited)

 

 

 

Three Months Ended
June 30,

 

 

 

2012

 

2011

 

 

 

 

 

 

 

Net sales revenue (net of the rebate portion of volume incentives of $10,695 and $11,356, respectively)

 

$

92,991

 

$

91,811

 

Cost and expenses:

 

 

 

 

 

Cost of goods sold

 

17,086

 

17,129

 

Volume incentives

 

33,540

 

33,390

 

Selling, general and administrative

 

32,054

 

33,240

 

 

 

82,680

 

83,759

 

Operating income

 

10,311

 

8,052

 

Other income (expense), net

 

165

 

(420

)

Income before provision for income taxes

 

10,476

 

7,632

 

Provision for income taxes

 

3,190

 

2,018

 

Net income

 

$

7,286

 

$

5,614

 

 

 

 

 

 

 

Basic and diluted net income per common share

 

 

 

 

 

 

 

 

 

 

 

Basic:

 

 

 

 

 

Net income per common share

 

$

0.47

 

$

0.36

 

 

 

 

 

 

 

Diluted:

 

 

 

 

 

Net income per common share

 

$

0.46

 

$

0.36

 

 

 

 

 

 

 

Weighted average basic common shares outstanding

 

15,605

 

15,536

 

Weighted average diluted common shares outstanding

 

15,864

 

15,659

 

 

 

 

 

 

 

Dividends declared per common share

 

$

0.05

 

$

 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

NATURE’S SUNSHINE PRODUCTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in thousands)

(Unaudited)

 

 

 

Three Months Ended
June 30,

 

 

 

2012

 

2011

 

 

 

 

 

 

 

Net income

 

$

7,286

 

$

5,614

 

Foreign currency translation (loss) gain (net of tax)

 

(464

)

986

 

Net unrealized (losses) gains on investment securities (net of tax)

 

(23

)

12

 

Total comprehensive income

 

$

6,799

 

$

6,612

 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

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Table of Contents

 

NATURE’S SUNSHINE PRODUCTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except per share information)

(Unaudited)

 

 

 

Six Months Ended
June 30,

 

 

 

2012

 

2011

 

 

 

 

 

 

 

Net sales revenue (net of the rebate portion of volume incentives of $22,286 and $22,938, respectively)

 

$

185,859

 

$

184,655

 

Cost and expenses:

 

 

 

 

 

Cost of goods sold

 

35,446

 

35,681

 

Volume incentives

 

67,121

 

67,688

 

Selling, general and administrative

 

63,807

 

65,613

 

 

 

166,374

 

168,982

 

Operating income

 

19,485

 

15,673

 

Other income (expense), net

 

55

 

(155

)

Income before provision for income taxes

 

19,540

 

15,518

 

Provision for income taxes

 

5,026

 

3,282

 

Net income

 

14,514

 

12,236

 

 

 

 

 

 

 

Basic and diluted net income per common share

 

 

 

 

 

 

 

 

 

 

 

Basic:

 

 

 

 

 

Net income per common share

 

$

0.93

 

$

0.79

 

 

 

 

 

 

 

Diluted:

 

 

 

 

 

Net income per common share

 

$

0.91

 

$

0.78

 

 

 

 

 

 

 

Weighted average basic common shares outstanding

 

15,591

 

15,535

 

Weighted average diluted common shares outstanding

 

15,953

 

15,591

 

 

 

 

 

 

 

Dividends declared per common share

 

$

0.05

 

$

 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

NATURE’S SUNSHINE PRODUCTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in thousands)

(Unaudited)

 

 

 

Six Months Ended
June 30,

 

 

 

2012

 

2011

 

 

 

 

 

 

 

Net income

 

$

14,514

 

$

12,236

 

Foreign currency translation (loss) gain (net of tax)

 

(355

)

1,485

 

Net unrealized gains on investment securities (net of tax)

 

21

 

22

 

Total comprehensive income

 

$

14,180

 

$

13,743

 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

5



Table of Contents

 

NATURE’S SUNSHINE PRODUCTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)

 

 

 

Six Months Ended
June 30,

 

 

 

2012

 

2011

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

Net income

 

$

14,514

 

$

12,236

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Provision for doubtful accounts

 

19

 

(69

)

Depreciation and amortization

 

2,015

 

2,117

 

Share-based compensation expense

 

1,321

 

1,144

 

Loss on sale of property and equipment

 

18

 

13

 

Deferred income taxes

 

(7

)

(419

)

Amortization of bond discount

 

3

 

10

 

Purchase of trading investment securities

 

(37

)

(38

)

Proceeds from sale of trading investment securities

 

180

 

226

 

Realized and unrealized gains on investments

 

(38

)

(56

)

Foreign exchange losses

 

505

 

1,237

 

Changes in assets and liabilities:

 

 

 

 

 

Accounts receivable

 

(713

)

(2,860

)

Inventories

 

(1,158

)

(1,577

)

Prepaid expenses and other current assets

 

(733

)

49

 

Other assets

 

60

 

(691

)

Accounts payable

 

(581

)

326

 

Accrued volume incentives

 

220

 

1,101

 

Accrued liabilities

 

(1,196

)

2,907

 

Deferred revenue

 

406

 

(568

)

Income taxes payable

 

(4,846

)

1,405

 

Liability related to unrecognized tax benefits

 

(642

)

(510

)

Deferred compensation payable

 

(83

)

(142

)

Net cash provided by operating activities

 

9,227

 

15,841

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

Purchases of property, plant and equipment

 

(2,562

)

(694

)

Proceeds from sale of property, plant and equipment

 

22

 

 

Proceeds from maturity and sale of investments available for sale

 

3,574

 

2,382

 

Purchase of investments available for sale

 

(178

)

(2,849

)

Net cash provided by (used in) investing activities

 

856

 

(1,161

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

Principal payments of long-term debt

 

(1,640

)

 

Dividends paid

 

(780

)

 

Proceeds from the exercise of stock options

 

401

 

295

 

Net cash (used in) provided by financing activities

 

(2,019

)

295

 

Effect of exchange rates on cash and cash equivalents

 

(680

)

419

 

Net increase in cash and cash equivalents

 

7,384

 

15,394

 

Cash and cash equivalents at the beginning of the period

 

58,969

 

47,604

 

Cash and cash equivalents at the end of the period

 

$

66,353

 

$

62,998

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

 

 

 

 

 

Cash paid for income taxes

 

$

11,132

 

$

2,688

 

Cash paid for interest

 

68

 

 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

6



Table of Contents

 

NATURE’S SUNSHINE PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except per-share information)

(Unaudited)

 

(1)                     Basis of Presentation

 

Nature’s Sunshine Products, Inc., together with its subsidiaries (hereinafter referred to collectively as the “Company”), is a natural health and wellness company primarily engaged in the manufacturing and direct selling of nutritional and personal care products. The Company is a Utah corporation with its principal place of business in Lehi, Utah, and sells its products to a sales force of independent Distributors and Managers who use the products themselves or resell them to other Distributors or consumers. The formulation, manufacturing, packaging, labeling, advertising, distribution and sale of each of the Company’s major product groups are subject to regulation by one or more governmental agencies.

 

The Company markets its products in Australia, Austria, Belarus, Canada, Colombia, Costa Rica, the Czech Republic, Denmark, the Dominican Republic, Ecuador, El Salvador, Finland, Germany, Guatemala, Honduras, Hong Kong, Indonesia, Ireland, Japan, Kazakhstan, Latvia, Lithuania, Malaysia, Mexico, Moldova, Mongolia, the Netherlands, Nicaragua, Norway, Panama, Peru, the Philippines, Poland, Russia, Singapore, South Korea, Spain, Sweden, Taiwan, Thailand, the Ukraine, the United Kingdom, the United States, Venezuela and Vietnam. The Company also exports its products to several other countries, including Argentina, Australia, Chile, Israel, New Zealand and Norway.

 

Principles of Consolidation

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries.  All significant intercompany accounts and transactions are eliminated in consolidation. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the Company’s financial information as of June 30, 2012, and for the three month and six month periods ended June 30, 2012 and 2011.  The results of operations of any interim period are not necessarily indicative of the results of operations to be expected for the fiscal year ending December 31, 2012.

 

It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.

 

Classification of Belarus as a Highly Inflationary Economy and Devaluation of Its Currency

 

As of June 30, 2012, Belarus was designated as a highly inflationary economy. Historically, the U.S. dollar has been our functional currency for this market. As a result, there were no resulting gains or losses from a re-measurement of the financial statements using official rates of the Company’s Belarusian subsidiary.  However, as a result of the weakening of the Belarusian ruble, the purchasing power of our Distributors in this market has become diminished. During the three and six months ended June 30, 2012, the Company’s Belarusian subsidiary’s net sales revenue represented approximately 1.6 percent and 1.7 percent of consolidated net sales revenue, respectively. The Company’s total and net assets related to Belarus as of June 30, 2012 and December 31, 2011 were insignificant.

 

Recent Accounting Pronouncements

 

In June 2011, the FASB issued Accounting Standards Update No. 2011-05 for Comprehensive Income (Topic 220): “Presentation of Comprehensive Income”. This update improves the comparability, consistency and transparency of financial reporting and increases the prominence of items reported in other comprehensive income. This update is effective for interim and annual periods beginning after December 15, 2011. The Company adopted ASU 2011-05 effective January 1, 2012 and it did not have a material impact on the Company’s consolidated statements of operations and financial condition.

 

In December 2011, the FASB issued Accounting Standards Update (ASU) No. 2011-12 for Comprehensive Income (Topic 220): “Presentation of Comprehensive Income”. This update supersedes certain pending paragraphs in Accounting Standards Update No. 2011-05 for Comprehensive Income (Topic 220) to effectively defer only those changes in Update 2011-05 that relate to the presentation of reclassification adjustments out of accumulated other comprehensive income. The deferral will be temporary to allow the Board time to redeliberate the presentation requirements for reclassification adjustments out of accumulated comprehensive income for annual and interim financial statements for public, private and non-profit entities. The adoption of this ASU is not expected to have a material impact on the Company’s consolidated statements of operations and financial condition.

 

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Table of Contents

 

(2)                     Inventories

 

Inventories consist of the following:

 

 

 

June 30,

 

December 31,

 

 

 

2012

 

2011

 

Raw Materials

 

$

13,170

 

$

12,992

 

Work in Progress

 

1,527

 

1,230

 

Finished Goods

 

28,055

 

27,389

 

 

 

$

42,752

 

$

41,611

 

 

(3)                     Intangible Assets

 

At June 30, 2012 and December 31, 2011, intangibles for product formulations had a gross carrying amount of $1,763 and $1,763, accumulated amortization of $686 and $612, and a net amount of $1,077 and $1,151, respectively. The estimated useful lives of the product formulations range from 9 to 15 years.

 

Amortization expense for intangible assets for the three months ended June 30, 2012 and 2011 was $37 and $37, respectively. Amortization expense for intangible assets for the six months ended June 30, 2012 and 2011 was $74 and $74, respectively. Estimated amortization expense for each of the next five fiscal years is $149.

 

(4)                     Investments

 

The amortized cost and estimated fair values of available-for-sale securities by balance sheet classification are as follows:

 

As of June 30, 2012

 

Amortized
Cost

 

Gross
Unrealized
Gains

 

Gross
Unrealized
Losses

 

Fair
Value

 

Municipal obligations

 

$

827

 

$

40

 

$

 

$

867

 

U.S. government securities funds

 

991

 

 

(7

)

984

 

Equity securities

 

227

 

208

 

(6

)

429

 

Total short-term investment securities

 

$

2,045

 

$

248

 

$

(13

)

$

2,280

 

 

As of December 31, 2011

 

Amortized
Cost

 

Gross
Unrealized
Gains

 

Gross
Unrealized
Losses

 

Fair
Value

 

Municipal obligations

 

$

1,158

 

$

51

 

$

 

$

1,209

 

U.S. government securities funds

 

988

 

 

(5

)

983

 

Short-term deposits

 

3,104

 

 

 

3,104

 

Equity securities

 

227

 

159

 

(5

)

381

 

Total short-term investment securities

 

$

5,477

 

$

210

 

$

(10

)

$

5,677

 

 

The municipal obligations held at a fair value of $867 at June 30, 2012 all mature in less than three years.

 

During the six month periods ended June 30, 2012 and 2011, the proceeds from the maturities and sales of available-for-sale securities were $3,574 and $2,382, respectively. There were no gross realized gains (losses) on sales of available-for-sale securities (net of tax) for the six month periods ended June 30, 2012 and 2011, respectively.

 

The Company’s trading securities portfolio totaled $1,346 at June 30, 2012 and $1,429 at December 31, 2011, and generated losses of $26 and $6 for the three months ended June 30, 2012 and 2011, respectively and generated gains of $60 and $75 for the six months ended June 30, 2012 and 2011, respectively.

 

As of June 30, 2012 and December 31, 2011, the Company had unrealized losses of $7 and $5, respectively, in its U.S. government securities funds. These losses are due to the interest rate sensitivity of the U.S. government securities funds.

 

(5)                     Long-Term Debt

 

On August 9, 2011, the Company entered into a Revolving Credit Agreement with Wells Fargo Bank, N. A., that permits the Company to borrow up to $15,000 through August 9, 2013, bearing interest at LIBOR plus 1.25 percent. The Company must pay an annual commitment fee of 0.25 percent on the unused portion of the commitment. At June 30, 2012 and December 31, 2011, the Company had $15,000 available under this facility.

 

A term loan of $10,000 was obtained in conjunction with the Revolving Credit Agreement with Wells Fargo Bank, N. A., and has a maturity date of August 9, 2014, a variable interest rate of LIBOR plus 1.25 percent (1.50 percent as of June 30, 2012)

 

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and monthly amortization of principal. The term loan is collateralized by the Company’s manufacturing facility in Spanish Fork, Utah.

 

Long-term debt at June 30, 2012 and December 31, 2011 consists of the following:

 

 

 

June 30,

 

December 31,

 

 

 

2012

 

2011

 

Term loan due in monthly installments of approximately $285, including interest, secured by real estate

 

$

7,552

 

$

9,190

 

Less current installments

 

(3,320

)

(3,296

)

Long-term debt

 

$

4,232

 

$

5,894

 

 

The various debt agreements contain restrictions on liquidity, leveraging, minimum net income and consecutive quarterly net losses. In addition, the agreements restrict capital expenditures, lease expenditures, other indebtedness, liens on assets, guaranties, loans and advances, and the merger, consolidation and the transfer of assets except in the ordinary course of business.  The Company is currently in compliance with these debt covenants.

 

(6)                     Net Income Per Share

 

Basic net income per common share (“Basic EPS”) is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted net income per common share (“Diluted EPS”) reflects the potential dilution that could occur if stock options or other contracts to issue common stock were exercised or converted into common stock. The computation of Diluted EPS does not assume exercise or conversion of securities that would have an anti-dilutive effect on net income per common share.

 

The following is a reconciliation of the numerator and denominator of Basic EPS to the numerator and denominator of Diluted EPS for the three and six months ended June 30, 2012 and 2011:

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

2012

 

2011

 

2012

 

2011

 

Net income

 

$

7,286

 

$

5,614

 

$

14,514

 

$

12,236

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average shares outstanding

 

15,605

 

15,536

 

15,591

 

15,535

 

 

 

 

 

 

 

 

 

 

 

Basic net income per common share:

 

 

 

 

 

 

 

 

 

Net income per common share

 

$

0.47

 

$

0.36

 

$

0.93

 

$

0.79

 

 

 

 

 

 

 

 

 

 

 

Diluted weighted average shares outstanding

 

 

 

 

 

 

 

 

 

Basic weighted average shares outstanding

 

15,605

 

15,536

 

15,591

 

15,535

 

Weighted average stock options outstanding

 

259

 

123

 

362

 

56

 

Diluted weighted average shares outstanding

 

15,864

 

15,659

 

15,953

 

15,591

 

 

 

 

 

 

 

 

 

 

 

Diluted net income per common share:

 

 

 

 

 

 

 

 

 

Net income per common share

 

$

0.46

 

$

0.36

 

$

0.91

 

$

0.78

 

 

 

 

 

 

 

 

 

 

 

Potentially dilutive shares excluded from diluted per share amounts:

 

 

 

 

 

 

 

 

 

Stock options

 

 

661

 

 

455

 

 

 

 

 

 

 

 

 

 

 

Potentially anti-dilutive shares excluded from diluted per share amounts:

 

 

 

 

 

 

 

 

 

Stock options

 

217

 

202

 

417

 

534

 

 

Potentially dilutive shares excluded from diluted per share amounts include performance-based options to purchase shares of common stock which will not vest until certain earnings metrics have been achieved. Potentially anti-dilutive shares excluded from diluted per share amounts include both time-based stock options and unearned performance-based options to purchase shares of common stock with exercise prices greater than the weighted-average share price during the period and shares that would be anti-dilutive to the computation of dilutive net income per share for the three and six months ended June 30, 2012 and 2011.

 

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(7)                     Capital Transactions

 

Dividends

 

The declaration of future dividends is subject to the discretion of the Company’s Board of Directors and will depend upon various factors, including the Company’s earnings, financial condition, restrictions imposed by any indebtedness that may be outstanding, cash requirements, future prospects and other factors deemed relevant by its Board of Directors.

 

On May 7, 2012, the Company announced that its Board of Directors approved a cash dividend of $0.05 per common share in an aggregate amount of $780 that was paid on May 29, 2012 to shareholders of record on May 18, 2012.

 

Share-based Compensation

 

Stock option activity for the six months ended June 30, 2012 is as follows:

 

 

 

Number of
Shares

 

Weighted Average
Exercise
Price Per Share

 

Options outstanding at December 31, 2011

 

1,374

 

$

9.88

 

Granted

 

217

 

15.65

 

Expired

 

(6

)

8.59

 

Exercised

 

(40

)

10.07

 

Options outstanding at June 30, 2012

 

1,545

 

10.69

 

 

During the six month period ended June 30, 2012, the Company issued options to purchase 217 shares of common stock under the 2009 Incentive Plan to the Company’s new senior executives. These options were issued with a weighted-average exercise price of $15.65 per share and a weighted-average grant date fair value of $7.66 per share. All of the options issued have an option termination date of ten years from the option grant date.

 

The fair value of each option grant was estimated on the date of the grant using the Black-Scholes option-pricing model with the following weighted-average assumptions for the six month period ended June 30, 2012:

 

 

 

2012

 

Expected life (in years)

 

4.0

 

Risk-free interest rate

 

0.3 to 0.4

 

Expected volatility

 

63.2 to 66.0

 

Dividend yield

 

0.0

 

 

Expected option lives and volatilities are based on historical data of the Company. The risk free interest rate is calculated as the average U.S. Treasury obligation rate that corresponds with the option life.

 

The Company’s outstanding stock options include both time-based stock options, which vest over differing periods ranging from the date of issuance up to 36 months from the option grant date, and performance-based stock options, which vest upon achieving operating income margins of six, eight and ten percent as reported in four of five consecutive quarters over the term of the options.

 

Share-based compensation expense from time-based stock options for the three month periods ended June 30, 2012 and 2011 was approximately $356 and $136, respectively; the related tax benefit was approximately $142 and $54, respectively. Share-based compensation expense from time-based stock options for the six month periods ended June 30, 2012 and 2011 was approximately $669 and $224, respectively; the related tax benefit was approximately $267 and $88, respectively. As of June 30, 2012 and December 31, 2011, the unrecognized share-based compensation expense related to the grants described above was $1,500 and $607, respectively. As of June 30, 2012, the remaining compensation expense is expected to be recognized over the weighted-average period of approximately 2.0 years.

 

Shared-based compensation expense from performance-based stock options for the three month periods ended June 30, 2012 and 2011was approximately $329 and $920, respectively; the related tax benefit was approximately $127 and $370, respectively. Shared-based compensation expense from performance-based stock options for the six month periods ended June 30, 2012 and 2011was approximately $652 and $920, respectively; the related tax benefit was approximately $255 and $370, respectively. As of June 30, 2012 and December 31, 2011, the unrecognized share-based compensation expense related to these options was approximately $0 and $652, respectively. As of June 30, 2012, there is no remaining compensation expense to be recognized for the performance-based stock options.

 

At June 30, 2012, the aggregate intrinsic value of outstanding time-based and performance-based stock options to purchase 1,545 shares of common stock, exercisable time-based and performance-based stock options to purchase 1,129 shares of common

 

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stock and time-based and performance-based stock options to purchase 392 shares of common stock that are expected to vest (net of expected forfeitures) was $6,943, $5,797 and $1,077, respectively. At December 31, 2011, the aggregate intrinsic value of outstanding options to purchase 1,374 shares of common stock, the exercisable options to purchase 772 shares of common stock, and options to purchase 602 shares of common stock expected to vest (net of expected forfeitures) was $7,757, $4,819 and $2,732, respectively.

 

(8)                     Segment Information

 

The Company has three business segments. These business segments are components of the Company for which separate information is available that is evaluated regularly by the chief executive officer in deciding how to allocate resources and in assessing relative performance.

 

The Company has two business segments that operate under the Nature’s Sunshine Products brand and are divided based on their geographic operations in the United States (NSP United States) and in countries outside the United States (NSP International). The Company’s third business segment operates under the Synergy WorldWide brand, which distributes its products through different marketing and distributor compensation plans and products with formulations that are sufficiently different from those of NSP United States and NSP International to warrant accounting for these operations as a separate business segment. Net sales revenues and operating income for each segment have been reduced by intercompany sales as they are not included in the measure of segment profit or loss reviewed by the chief executive officer.

 

Reportable business segment information is as follows:

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

 

2012

 

2011

 

2012

 

2011

 

Net sales revenue:

 

 

 

 

 

 

 

 

 

Nature’s Sunshine Products:

 

 

 

 

 

 

 

 

 

United States

 

$

35,522

 

$

35,897

 

$

70,358

 

$

71,542

 

International

 

31,223

 

33,055

 

65,912

 

69,602

 

 

 

66,745

 

68,952

 

136,270

 

141,144

 

Synergy WorldWide

 

26,246

 

22,859

 

49,589

 

43,511

 

Total net sales revenue

 

92,991

 

91,811

 

185,859

 

184,655

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Nature’s Sunshine Products:

 

 

 

 

 

 

 

 

 

United States

 

31,321

 

32,194

 

63,229

 

64,081

 

International

 

27,941

 

31,208

 

58,034

 

65,701

 

 

 

59,262

 

63,402

 

121,263

 

129,782

 

Synergy WorldWide

 

23,418

 

20,357

 

45,111

 

39,200

 

Total operating expenses

 

82,680

 

83,759

 

166,374

 

168,982

 

 

 

 

 

 

 

 

 

 

 

Operating income:

 

 

 

 

 

 

 

 

 

Nature’s Sunshine Products:

 

 

 

 

 

 

 

 

 

United States

 

4,201

 

3,703

 

7,129

 

7,461

 

International

 

3,282

 

1,847

 

7,878

 

3,901

 

 

 

7,483

 

5,550

 

15,007

 

11,362

 

Synergy WorldWide

 

2,828

 

2,502

 

4,478

 

4,311

 

Total operating income

 

10,311

 

8,052

 

19,485

 

15,673

 

 

 

 

 

 

 

 

 

 

 

Other income (expense), net

 

165

 

(420

)

55

 

(155

)

Income before provision for income taxes

 

$

10,476

 

$

7,632

 

$

19,540

 

$

15,518

 

 

From an individual country perspective, only the United States comprises 10 percent or more of consolidated net sales revenue for the three and six month periods ended June 30, 2012 and 2011 as follows:

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

 

2012

 

2011

 

2012

 

2011

 

Net sales revenue:

 

 

 

 

 

 

 

 

 

United States

 

$

40,410

 

$

41,196

 

$

80,147

 

$

81,983

 

Other

 

52,581

 

50,615

 

105,712

 

102,672

 

 

 

$

92,991

 

$

91,811

 

$

185,859

 

$

184,655

 

 

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Revenue generated by each of the Company’s product lines is set forth below:

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

 

2012

 

2011

 

2012

 

2011

 

NSP United States:

 

 

 

 

 

 

 

 

 

Herbal Products

 

$

19,454

 

$

19,310

 

$

38,201

 

$

37,903

 

Vitamin, Mineral and Other Nutritional Supplements

 

14,402

 

14,316

 

28,765

 

28,924

 

Personal Care Products

 

1,005

 

1,146

 

2,006

 

2,317

 

Other Products

 

661

 

1,125

 

1,386

 

2,398

 

 

 

35,522

 

35,897

 

70,358

 

71,542

 

NSP International:

 

 

 

 

 

 

 

 

 

Herbal Products

 

$

16,598

 

$

17,561

 

$

35,275

 

$

37,742

 

Vitamin, Mineral and Other Nutritional Supplements

 

12,087

 

11,975

 

25,154

 

25,578

 

Personal Care Products

 

2,202

 

3,039

 

4,716

 

5,345

 

Other Products

 

336

 

480

 

767

 

937

 

 

 

31,223

 

33,055

 

65,912

 

69,602

 

Synergy WorldWide:

 

 

 

 

 

 

 

 

 

Herbal Products

 

$

11,530

 

$

9,944

 

$

19,977

 

$

17,631

 

Vitamin, Mineral and Other Nutritional Supplements

 

13,028

 

11,102

 

26,065

 

21,969

 

Personal Care Products

 

1,188

 

1,208

 

2,626

 

2,852

 

Other Products

 

500

 

605

 

921

 

1,059

 

 

 

26,246

 

22,859

 

49,589

 

43,511

 

 

 

$

92,991

 

$

91,811

 

$

185,859

 

$

184,655

 

 

From an individual country perspective, only the United States and Venezuela comprise 10 percent or more of consolidated property, plant and equipment as follows:

 

 

 

June 30,
2012

 

December 31,
2011

 

Property, plant and equipment:

 

 

 

 

 

United States

 

$

19,074

 

$

18,119

 

Venezuela

 

3,737

 

3,939

 

Other

 

3,007

 

3,079

 

Total property, plant and equipment

 

$

25,818

 

$

25,137

 

 

(9)                     Income Taxes

 

Interim income taxes are based on an estimated annualized effective tax rate applied to the respective quarterly periods, adjusted for discrete tax items in the periods in which they occur. For the three months ended June 30, 2012 and 2011, the Company’s provision for income taxes, as a percentage of income before income taxes was 30.5 percent and 26.4 percent, respectively, compared with a U.S. federal statutory rate of 35.0 percent.  For the six months ended June 30, 2012 and 2011, the Company’s provision for income taxes, as a percentage of income before income taxes was 25.7 percent and 21.1 percent, respectively, compared with a U.S. federal statutory rate of 35.0 percent.

 

The differences between the effective tax rates and the U.S. federal statutory tax rate for the three months ended June 30, 2012 were primarily attributed to a domestic valuation allowance release related to the utilization of foreign tax credits (-3.4 percent), in addition to net favorable foreign items related to foreign tax rate differences, the impact of unremitted earnings, and adjustments to foreign valuation allowances (-2.2 percent).

 

The differences between the effective tax rates and the U.S. federal statutory rate for the three months ended June 30, 2011 were primarily attributed to a decrease in deferred tax liabilities related to taxes on unremitted foreign earnings (-3.5 percent).

 

The differences between the effective tax rate and the U.S. federal statutory tax rate for the six months ended June 30, 2012 were primarily attributed to a domestic valuation allowance release related to the utilization of foreign tax credits (-6.4 percent), in addition to net favorable foreign items related to foreign tax rate differences, the impact of unremitted earnings, and adjustments to foreign valuation allowances (-4.1 percent).

 

The differences between the effective tax rate and the U.S. federal statutory tax rate for the six months ended June 30, 2011 were primarily attributed to net decreases in tax liabilities associated with uncertain tax positions due to the expiration of the

 

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statute of limitations on certain liabilities in various foreign jurisdictions (-6.4%), in addition to a decrease in deferred tax liabilities related to taxes on unremitted foreign earnings (-5.7%).

 

The Company’s U.S. federal income tax returns for 2003 through 2007, and 2009 and 2010 are open to examination for federal tax purposes. The Company has several foreign tax jurisdictions that have open tax years from 2004 through 2011. The Internal Revenue Service (“IRS”) is currently conducting an audit of the Company’s U.S. federal income tax returns for the 2009 and 2010 tax years.

 

In October 2009, the IRS issued an examination report formally proposing adjustments with respect to the 2003 through 2005 taxable years, which primarily relate to the prices that were charged in intra-group transfers of property and the disallowance of related deductions. The Company challenged the IRS proposals, and took the matter before the Office of Appeals of the Internal Revenue Service.  A settlement was reached with IRS Appeals and a proposed settlement agreement was signed by NSP in January 2012. The Company has made all required payments as of June 30, 2012 related to this matter and, absent further comment from the IRS, the examination period for the 2003 through 2005 taxable years will close on December 31, 2012.

 

During 2011, the IRS issued an examination report formally proposing adjustments with respect to the 2006 through 2008 taxable years.  As with the previous examination cycle discussed above, the adjustments relate primarily to the prices that were charged in intra-group transfers of property and the disallowance of related deductions.  The Company reached a settlement of the issues with the IRS examination team and an agreement was signed by the Company in January 2012.  On March 7, 2012, the Company received a letter from the IRS examination team stating that they accepted the examination report and do not plan to make additional changes. The Company has made all required payments as of June 30, 2012 related to this matter and, absent further comment from the IRS, the examination period for the 2006 through 2007 taxable years will close on September 15, 2012. The examination period for the 2008 taxable year previously closed on March 15, 2012.

 

As of June 30, 2012, the Company had accrued $9,784 related to unrecognized tax positions compared with $10,426 as of December 31, 2011. This net decrease was primarily attributed to the expiration of the statute of limitations on certain liabilities in various foreign jurisdictions.

 

Changes to the effective rate due to dividends received from foreign subsidiaries, impact of foreign tax credits and the unremitted earnings calculation are expected to be recurring; however, depending on various factors, the changes may be favorable or unfavorable in a particular period. The Company’s aggregate consolidated effective tax rate will typically reflect differences between the lower statutory rates in foreign markets compared to the U.S. statutory rate of 35 percent. Given the large number of jurisdictions in which the Company does business and the number of factors that can impact effective tax rates in any given year, the consolidated effective rate is likely to reflect relatively significant fluctuations from year-to-year.

 

Although the Company believes its estimates related to its unrecognized tax benefits are reasonable, the Company can provide no assurances that the final tax outcome of these matters will not be different from that which it has reflected in its historical income tax provisions and accruals. Any difference in the final tax outcome of these matters could have a material impact on the Company’s income tax provision and operating results in the periods in which the Company makes such determination.

 

(10)              Commitments and Contingencies

 

Legal Proceedings

 

The Company is party to various legal proceedings related to value-added tax assessments and other civil litigation. Management cannot predict the ultimate outcome of these proceedings, individually or in the aggregate, or their resulting effect on the Company’s business, financial position, results of operations or cash flows as litigation and related matters are subject to inherent uncertainties, and unfavorable rulings could occur. Therefore, no provision for losses has been provided. The Company believes future payments related to these matters could range from $0 to approximately $1,000. Were an unfavorable outcome to occur, there exists the possibility of a material adverse impact on the business, financial position, results of operations, or cash flows for the periods in which the ruling occurs and/or future periods. The Company maintains directors’ and officers’ liability, product liability, general liability and excess liability insurance coverage. However, no assurances can be given that such insurance will continue to be available at an acceptable cost to the Company, that such coverage will be sufficient to cover one or more large claims, or that the insurers will not successfully disclaim coverage as to a pending or future claim.

 

Non-income Tax Contingencies

 

The Company has reserved for certain foreign non-income tax contingencies based on the likelihood of an obligation in accordance with accounting guidance for probable loss contingencies. Loss contingency provisions are recorded for probable losses at management’s best estimate of a loss, or when a best estimate cannot be made, a minimum loss contingency amount is recorded. The Company provides provisions for potential payments of tax to various tax authorities for contingencies related to non-income tax matters, including value-added taxes. As of June 30, 2012 and December 31, 2011, accrued liabilities include $6,768 and $6,921, respectively, related to non-income tax contingencies. While management believes that the assumptions and estimates used to determine this liability are reasonable, the ultimate outcome of those matters cannot presently be determined. The Company is not able at this time to predict the ultimate outcomes of those matters or to estimate the effect the ultimate outcomes, if greater than the amounts accrued, would have on the financial condition, results of operations or cash flows of the Company.

 

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Table of Contents

 

Government Regulations

 

The Company is subject to governmental regulations pertaining to product formulation, labeling and packaging, product claims and advertising, and to the Company’s direct selling system. The Company is also subject to the jurisdiction of numerous foreign tax and customs authorities. Any assertions or determinations that either the Company or the Company’s Distributors are not in compliance with existing statutes, laws, rules or regulations could potentially have a material adverse effect on the Company’s operations. In addition, in any country or jurisdiction, the adoption of new statutes, laws, rules or regulations, or changes in the interpretation of existing statutes, laws, rules or regulations could have a material adverse effect on the Company and its operations. Although management believes that the Company is in compliance, in all material respects, with the statutes, laws, rules and regulations of every jurisdiction in which it operates, no assurance can be given that the Company’s compliance with applicable statutes, laws, rules and regulations will not be challenged by foreign authorities or that such challenges will not have a material adverse effect on the Company’s financial position, results of operations or cash flows.

 

(11)              Fair Value Measurements

 

The fair value of a financial instrument is the amount that could be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets are marked to bid prices and financial liabilities are marked to offer prices. Fair value measurements do not include transaction costs. A fair value hierarchy is used to prioritize the quality and reliability of the information used to determine fair values of each financial instrument. Categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is defined into the following three categories:

 

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data.

 

The following table presents the Company’s hierarchy for its assets measured at fair value on a recurring basis as of June 30, 2012:

 

 

 

Level 1

 

Level 2

 

Level 3

 

 

 

 

 

Quoted Prices
in Active
Markets for
Identical Assets

 

Significant
Other
Observable
Inputs

 

Significant
Unobservable
Inputs

 

Total

 

Investments available for sale

 

 

 

 

 

 

 

 

 

Municipal obligations

 

$

 

$

867

 

$

 

$

867

 

U.S. government security funds

 

984

 

 

 

984

 

Equity securities

 

429

 

 

 

429

 

Investment securities

 

1,346

 

 

 

1,346

 

Total assets measured at fair value on a recurring basis

 

$

2,759

 

$

867

 

$

 

$

3,626

 

 

The following table presents the Company’s hierarchy for its assets measured at fair value on a recurring basis as of December 31, 2011:

 

 

 

Level 1

 

Level 2

 

Level 3

 

 

 

 

 

Quoted Prices
in Active
Markets for
Identical Assets

 

Significant
Other
Observable
Inputs

 

Significant
Unobservable
Inputs

 

Total

 

Investments available for sale

 

 

 

 

 

 

 

 

 

Municipal obligations

 

$

 

$

1,209

 

$

 

$

1,209

 

U.S. government security funds

 

983

 

 

 

983

 

Short-term deposits

 

 

3,104

 

 

3,104

 

Equity securities

 

381

 

 

 

381

 

Investment securities

 

1,429

 

 

 

1,429

 

Total assets measured at fair value on a recurring basis

 

$

2,793

 

$

4,313

 

$

 

$

7,106

 

 

Investments available for sale — The majority of the Company’s investment portfolio consists of various fixed income securities such as U.S government funds, state and municipal bonds, mutual funds, short-term deposits and equity securities.  The Level 1 securities are valued using quoted prices for identical assets in active markets including equity securities, U.S. government treasuries, and various mutual funds.  The Level 2 securities include investments in state and municipal bonds whereby all significant inputs are observable or can be derived from or corroborated by observable market data for substantially the full term of the asset.

 

Investment securities — The majority of the Company’s trading portfolio consists of various marketable securities that are using quoted prices in active markets.

 

For the six months ended June 30, 2012 and for the year ended December 31, 2011, there were no fair value measurements using the significant unobservable inputs (Level 3).

 

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The carrying amounts reflected on the consolidated balance sheet for cash and cash equivalents, accounts receivable, and accounts payable approximate fair value due to their short-term nature. The carrying amount reflected in the consolidated balance sheet for long-term debt approximates fair value due to the interest rate on the debt being variable based on current market rates. During the three months ended June 30, 2012 and 2011, the Company did not have any write-offs related to the re-measurement of non-financial assets at fair value on a nonrecurring basis subsequent to their initial recognition.

 

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Item 2.                              MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following Management’s Discussion and Analysis should be read in conjunction with the unaudited 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, 2011, and our Reports on Form 8-K, that have been filed with the SEC since then through the date of this report.

 

Throughout this report, we refer to Nature’s Sunshine Products, Inc., together with its subsidiaries, as “we,” “us,” “our,” “Company” or “the Company.”

 

OVERVIEW

 

Nature’s Sunshine Products, Inc., together with its subsidiaries, is a natural health and wellness company primarily engaged in the manufacturing and direct selling of nutritional and personal care products. The Company is a Utah corporation with its principal place of business in Lehi, Utah, and sells its products to a sales force of independent Distributors, customers and Managers who use the products themselves or resell them to other Distributors or customers. The formulation, manufacturing, packaging, labeling, advertising, distribution and sale of each of our major product groups are subject to regulation by one or more governmental agencies.

 

The Company has two reportable business segments that operate under the Nature’s Sunshine Products brand and are divided based on their geographic operations in the United States (NSP United States) and in countries outside the United States (NSP International). We also sell our products through a separate division and operating business segment, Synergy WorldWide. Synergy WorldWide offers marketing plans, Distributor compensation plans and product formulations that are sufficiently different from those of NSP United States and NSP International to warrant its treatment as a separately reportable business segment.

 

We market our products in Australia, Austria, Belarus, Canada, Colombia, Costa Rica, the Czech Republic, Denmark, the Dominican Republic, Ecuador, El Salvador, Finland, Germany, Guatemala, Honduras, Hong Kong, Indonesia, Ireland, Japan, Kazakhstan, Latvia, Lithuania, Malaysia, Mexico, Moldova, Mongolia, the Netherlands, Nicaragua, Norway, Panama, Peru, the Philippines, Poland, Russia, Singapore, South Korea, Spain, Sweden, Taiwan, Thailand, the Ukraine, the United Kingdom, the United States, Venezuela and Vietnam. We export our products to several other countries, including Argentina, Australia, Chile, Israel, New Zealand and Norway.

 

During the second quarter of 2012, our consolidated net sales increased approximately 1.3 percent compared to the second quarter of 2011. Synergy WorldWide’s net sales revenue increased approximately 14.8 percent (or 20.0 percent in local currencies excluding the negative impact of foreign currency fluctuations). NSP International’s net sales revenues decreased approximately 5.5 percent compared to the same period in 2011 (or 4.0 percent excluding the negative impact of foreign currency fluctuations), while NSP United States net sales decreased approximately 1.0 percent compared to the same period in 2011. The significant sales revenue growth was from our Synergy businesses in Europe and Korea during 2012. Gains in these markets were partially offset by decreases in our NSP Mexico, NSP and Synergy Japan, and NSP Peru markets.

 

As a result of our prior year settlement with NutriPlus LLC related to our Russian business, our operating costs for the quarter ended June 30, 2012 were lower than the comparable period of 2011 by $2.1 million, of which $1.3 million was related to lower royalties and $0.8 million was related to lower professional fees.

 

Over the same period, selling, general and administrative costs as a percentage of net sales revenue for the quarter decreased from 36.2 percent in the prior year period to 34.4 percent in the current year as a result of revenue growth (primarily in Synergy WorldWide), lower royalty and legal costs related to our Russian business as noted above, reductions in variable costs for NSP Mexico and Synergy Japan, as well as favorable currency rate fluctuations, offset by increases in variable costs for Synergy Europe and Korea, and NSP Russia, net changes in sales tax reserves and U.S. healthcare costs.

 

We distribute our products to consumers through an independent sales force comprised of Managers and Distributors. A person who joins our independent sales force begins as a “Distributor.” A Distributor interested in earning additional income by committing more time and effort to selling our products may earn “Manager” status. Manager status is contingent upon attaining certain purchase volume levels, recruiting additional Distributors, and demonstrating leadership abilities. Active Managers WorldWide totaled approximately 29,100 and 29,600 at June 30, 2012 and 2011, respectively. Active Distributors and customers WorldWide totaled approximately 656,500 and 675,100 at June 30, 2012 and 2011, respectively.

 

RESULTS OF OPERATIONS

 

The following table summarizes our unaudited consolidated operating results in U.S. dollars and as a percentage of net sales revenue for the three months ended June 30, 2012 and 2011 (dollar amounts in thousands).

 

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Change from

 

 

 

2012

 

2011

 

2012 to 2011

 

 

 

Total

 

Percent of

 

Total

 

Percent of

 

 

 

 

 

dollars

 

net sales

 

dollars

 

net sales

 

Dollar

 

Percentage

 

Net sales revenue

 

$

92,991

 

100.0

%

$

91,811

 

100.0

%

$

1,180

 

1.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold

 

17,086

 

18.4

 

17,129

 

18.6

 

(43

)

(0.3

)

Volume incentives

 

33,540

 

36.1

 

33,390

 

36.4

 

150

 

0.4

 

SG&A expenses

 

32,054

 

34.4

 

33,240

 

36.2

 

(1,186

)

(3.6

)

Total operating expenses

 

82,680

 

88.9

 

83,759

 

91.2

 

(1,079

)

(1.3

)

Operating income

 

10,311

 

11.1

 

8,052

 

8.8

 

2,259

 

28.1

 

Other income, net

 

165

 

0.2

 

(420

)

(0.5

)

585

 

139.3

 

Income before provision for income taxes

 

10,476

 

11.3

 

7,632

 

8.3

 

2,844

 

37.3

 

Provision for income taxes

 

3,190

 

3.4

 

2,018

 

2.2

 

1,172

 

58.1

 

Net income

 

$

7,286

 

7.9

%

$

5,614

 

6.1

%

$

1,672

 

29.8

%

 

The following table summarizes our unaudited consolidated operating results in U.S. dollars and as a percentage of net sales revenue for the six months ended June 30, 2012 and 2011 (dollar amounts in thousands).

 

 

 

 

 

 

 

Change from

 

 

 

2012

 

2011

 

2012 to 2011

 

 

 

Total

 

Percent of

 

Total

 

Percent of

 

 

 

 

 

dollars

 

net sales

 

dollars

 

net sales

 

Dollar

 

Percentage

 

Net sales revenue

 

$

185,859

 

100.0

%

$

184,655

 

100.0

%

$

1,204

 

0.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold

 

35,446

 

19.1

 

35,681

 

19.3

 

(235

)

(0.7

)

Volume incentives

 

67,121

 

36.1

 

67,688

 

36.7

 

(567

)

(0.8

)

SG&A expenses

 

63,807

 

34.3

 

65,613

 

35.5

 

(1,806

)

(2.8

)

Total operating expenses

 

166,374

 

89.5

 

168,982

 

91.5

 

(2,608

)

(1.5

)

Operating income

 

19,485

 

10.5

 

15,673

 

8.5

 

3,812

 

24.3

 

Other income, net

 

55

 

0.0

 

(155

)

(0.1

)

210

 

(135.5

)

Income before provision for income taxes

 

19,540

 

10.5

 

15,518

 

8.4

 

4,022

 

25.9

 

Provision for income taxes

 

5,026

 

2.7

 

3,282

 

1.8

 

1,744

 

53.1

 

Net income

 

$

14,514

 

7.8

%

$

12,236

 

6.6

%

$

2,278

 

18.6

%

 

Net Sales Revenue

 

Consolidated net sales revenue for the three and six months ended June 30, 2012 was $93.0 million and $185.9 million compared to $91.8 million and $184.7 million for the same periods in 2011, increases of approximately 1.3 percent and 0.7 percent, respectively. The increases in net sales revenue for the three and six months ended June 30, 2012 compared to the same periods in 2011 are primarily due to growth in Synergy WorldWide, offset by declines in NSP United States and NSP International.

 

NSP United States

 

Net sales revenue for our NSP United States segment for the three and six months ended June 30, 2012 was $35.5 million and $70.4 million compared to $35.9 million and $71.5 million for the same periods in 2011, or decreases of 1.0 percent and 1.7 percent, respectively, in 2012 compared to 2011. Active Managers within NSP United States totaled approximately 5,800 and 6,200 at June 30, 2012 and 2011, respectively. Active Distributors and customers within NSP United States totaled approximately 193,700 and 194,200 at June 30, 2012 and 2011, respectively. Managers and Distributors within NSP United States are predominantly practitioners of nutritional supplement therapies and retailers and consumers of our products. The number of active Managers, Distributors and customers decreased due to lower retention, partially offset by a modest improvement in recruiting. Net sales for NSP United States core products (Herbal Products Vitamin, Mineral, and Other Nutritional Supplements, and Personal Care Products) increased by 0.3 percent, but were offset by the discontinuance of non-core products (other products including essential oils, sales aids and other miscellaneous products) for the quarter.

 

NSP United States includes both English and Spanish language sales divisions, of which the English language division is approximately 80 percent of segment net sales revenue. The English language division net sales revenue increased $0.2 million and decreased $0.8 million, or an increase of 0.8 percent and a decrease of 1.4 percent, respectively, for the three and six months ended June 30, 2012, compared to the same period in 2011. The Spanish language division net sales revenue decreased $0.6

 

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million and $0.4 million, or 7.3 percent and 2.7 percent, respectively, for the three and six months ended June 30, 2012, compared to the same period in 2011.

 

NSP International

 

NSP International reported net sales revenue for the three and six months ended June 30, 2012 of $31.2 million and $65.9 million, compared to $33.1 million and $69.6 million for the same periods in 2011, decreases of approximately 5.5 percent and 5.3 percent, respectively. In local currencies, net sales decreased 4.0 percent and 4.1 percent, respectively. Fluctuation in foreign exchange rates had a $0.5 million and $0.8 million unfavorable impact on net sales for the three and six months ended June 30, 2012, respectively. Active Managers within NSP International totaled approximately 20,100 and 20,900 at June 30, 2012 and 2011, respectively. Active Distributors and customers within NSP International totaled approximately 373,600 and 398,000 at June 30, 2012 and 2011, respectively. Managers and Distributors within NSP International are predominantly practitioners of nutritional supplement therapies and retailers or consumers of our products, with the exception of our Russian markets which are more network marketing oriented. The number of active Managers, Distributors and customers decreased in NSP International (excluding our Russian markets) due to lower retention, partially offset by a modest improvement in recruiting, in a business environment that continues to be challenging.

 

Notable activity in the following markets contributed to the results of NSP International:

 

In our Russian markets (Russia, the Ukraine, Belarus and several other Eastern European nations), net sales revenues increased approximately $0.3 million and decreased approximately $0.3 million, or an increase of 2.3 percent and a decrease of 1.0 percent, for the three and six months ended June 30, 2012, respectively, compared to the same periods in 2011. Excluding Belarus, net sales increased by $0.3 million for the three and six months ended June 30, 2012. The decrease in year-to date sales was related to the current debt crisis in Belarus, which has adversely affected our Belarusian Distributors’ ability to obtain foreign currency to purchase our products, and may continue to adversely affect sales going forward. Sales in Belarus were flat and $0.6 lower for the three and six months ended June 30, 2012, respectively, compared to the same period in 2011.

 

In Mexico, our net sales revenues decreased approximately $0.6 million and $1.0 million, or 18.8 percent and 16.2 percent, for the three and six months ended June 30, 2012, respectively, compared to the same periods in 2011. In local currency, net sales decreased 9.4 percent and 6.7 percent, respectively, compared to the same periods in 2011. Fluctuations in foreign exchange rates had a $0.3 million and $0.6 million unfavorable impact on net sales for the three and six months ended June 30, 2012. The decrease in sales is due to difficulties attracting and retaining key talent in managerial positions in the local market, which has a detrimental effect on our recruiting and retention.

 

In Peru, our net sales revenues decreased approximately $0.5 million and $1.3 million, or 50.0 percent and 60.3 percent, for the three and six months ended June 30, 2012, respectively, compared to the same periods in 2011. Fluctuations in foreign exchange rates had a nominally favorable impact on net sales for the periods. The decrease in net sales is principally due to a change in local regulations that has restricted our ability to sell several of our key products in this market through a direct selling business model. We continue to evaluate our product mix and selling model for Peru.

 

In Japan, our net sales revenues decreased approximately $0.4 million and $0.6 million, or 22.2 percent and 18.4 percent, for the three and six months ended June 30, 2012, respectively, compared to the same periods in 2011.  In local currency, net sales decreased 27.8 percent and 20.7 percent compared to the same periods in 2011. Fluctuations in foreign exchange rates had a $0.1 million and $0.1 million favorable impact on net sales for the three and six months ended June 30, 2012, respectively, compared to the same periods in 2011. The decrease in local currency sales is partially due to the continued difficulty in rebounding from the effects of the 2011 natural disasters, specifically recruiting and retaining Distributors.

 

Synergy WorldWide

 

Synergy WorldWide reported net sales revenue for the three and six months ended June 30, 2012 of $26.2 million and $49.6 million, compared to $22.9 million and $43.5 million in 2011, increases of approximately 14.8 percent and 14.0 percent, respectively. In local currencies, net sales increased 20.0 percent and 17.9 percent for the three and six months ended June 30, 2012, respectively, compared to the same periods in 2011. Fluctuations in foreign exchange rates had a $1.2 million and $1.7 million unfavorable impact on net sales for the three and six months ended June 30, 2012, respectively, compared to the same periods in 2011. Active Managers within Synergy WorldWide totaled approximately 3,200 and 2,500 at June 30, 2012 and 2011, respectively. Active Distributors and customers within Synergy WorldWide totaled approximately 89,200 and 82,900 at June 30, 2012 and 2011, respectively.

 

Notable activity in the following markets contributed to the results of Synergy WorldWide:

 

In Europe, our net sales revenues increased approximately $1.7 million and $4.0 million, or 31.5 percent and 39.2 percent, for the three and six months ended June 30, 2012, respectively, compared to the same periods in 2011. In local currency, our net sales increased 35.2 percent and 51.6 percent, respectively, compared to the same periods in 2011.  Fluctuations in foreign exchange rates had a $0.7 million and $1.1 million unfavorable impact on net sales for the three and six months ended June 30,

 

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2012 compared to the same periods in 2011. Strong Distributor leadership continues to effectively build our Distributor base thereby driving increased market penetration.

 

In Korea, our net sales revenues increased approximately $2.9 million and $5.0 million, or 59.2 percent and 61.3 percent, for the three and six months ended June 30, 2012, respectively, compared to the same periods in 2011. In local currency, our net sales increased 67.3 percent and 67.3 percent, compared to the same periods in 2011.  Fluctuations in foreign exchange rates had a $0.4 million and $0.5 million unfavorable impact on net sales for the three and six months ended June 30, 2012, compared to the same periods in 2011. Net sales growth is due to productive joint Company and Manager efforts to develop sales groups as well as a broad product line that is well accepted in Korea.

 

In Japan, our net sales revenues decreased approximately $0.7 million and $2.3 million, or 21.2 percent and 31.4 percent, for the three and six months ended June 30, 2012, respectively, compared to the same periods in 2011.  In local currency, net sales decreased 24.2 percent and 33.3 percent compared to the same periods in 2011. Fluctuations in foreign exchange rates had a $0.1 million and $0.1 million favorable impact on net sales for the three and six months ended June 30, 2012, compared to the same periods in 2011. The decrease in local currency sales is partially due to the continued difficulty in rebounding from the effects of the 2011 natural disasters, specifically recruiting and retaining Distributors. In addition, unusually high product returns during the first quarter related to a specific promotion contributed significantly to reduced net sales revenue for the six months (returns for the second quarter were insignificant). The product returns were not related to product quality.

 

Further information related to NSP United States, NSP International and Synergy WorldWide business segments is set forth in Note 8 to the Unaudited Condensed Consolidated Financial Statements in Part 1, Item 1 of this report.

 

Cost of Goods Sold

 

Cost of goods sold as a percent of net sales revenue decreased to 18.4 percent and 19.1 percent for the three and six months ended June 30, 2012, compared to 18.6 percent and 19.3 percent for the same periods in 2011. Changes in the cost of goods sold are primarily the result of changes in product mix between markets. The year-to-date costs of goods sold rates were greater than the second quarter rates during each period of 2011 and 2012 due to promotions during the first quarter of each year related to new product launches and national/regional conventions during those periods.  While the Company intends to seek continued cost reductions where possible, pricing pressure on raw materials, fuel costs and other factors could adversely affect our ability to reduce or maintain our current cost of goods sold rate in the future.

 

Volume Incentives

 

Volume incentives are a significant part of our direct sales marketing program, and represent commission payments made to our independent Distributors and Managers. These payments are designed to provide incentives for reaching higher sales levels and for recruiting additional Distributors.  Volume incentives vary slightly, on a percentage basis, by product due to our pricing policies and commission plans in place in our various operations.  Volume incentives as a percent of net sales revenue decreased to 36.1 percent for the three and six months in 2012, compared to 36.4 percent and 36.7 percent for the same periods in 2011.

 

Selling, General and Administrative

 

Selling, general and administrative expenses decreased to 34.5 percent and 34.3 percent of net sales revenue for the three and six months ended June 30, 2012, compared to 36.2 percent and 35.5 percent in 2011, or by approximately $1.2 million and $1.8 million to $32.1 million and $63.8 million for the three and six months ended June 30, 2012, respectively.

 

Significant increases to selling, general and administrative expenses during the three and six months ended June 30, 2012, compared to the same period in 2011 included:

 

·                  $1.4 million and $2.6 million of increased variable costs related to the sales growth of Synergy WorldWide in Europe, Korea and the United States;

·                  $0.4 million and $0.7 million of increased healthcare costs for U.S. employees;

·                  $0.2 million and $0.7 million of increased U.S. related sales tax expense related to current year sales tax reserve increases; and

·                  $0.1 million and $0.6 million of increased compensation related costs for U.S. employees.

 

Significant decreases to selling, general and administrative expenses during the three and six months ended June 30, 2012, compared to the same period in 2011 included:

 

·                  $1.3 million and $2.9 million of decreased royalty costs related to our Russian business as a result of the NutriPlus LLC settlement;

·                  $0.8 million and $1.2 million of decreased professional fees related to our Russian business as a result of the NutriPlus LLC settlement;

 

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·                  $0.5 million and $0.6 million of favorable currency fluctuations; and

·                  $0.2 million and $1.4 million decrease in variable costs related lower sales of NSP Mexico, Japan, and the United States and Synergy Japan.

 

We continue to implement cost reduction measures within all of our operating segments.

 

Operating Income

 

Consolidated operating income increased approximately $2.3 million during the three months ended June 30, 2012, compared to the same period in 2011, from $8.1 million to $10.3 million. For the six months ended June 30, 2012, operating income increased approximately $3.8 million, compared to the same period in 2011, from $15.7 million to $19.5 million. Operating income increased to 11.1 percent and 10.5 percent of net sales for the three and six months ended June 30, 2012, compared to 8.8 percent and 8.5 percent for the same periods in 2011, respectively.

 

Operating income for NSP United States increased $0.5 million and decreased $0.3 million for the three and six months ended June 30, 2012, compared to the same period in 2011, from $3.7 million and $7.5 million to $4.2 million and $7.1 million, respectively. The increase in operating income for the three months ended June 30, 2012 compared to the same period 2011 is primarily due to a reduction of the cost of goods sold. The decrease in operating income for the six months ended June 30, 2012 is primarily the result of the decrease in net sales revenue and increases in our selling, general and administrative expenses related to promotional incentive trips and stock-based compensation expense.

 

Operating income for NSP International increased approximately $1.4 million and $4.0 million for the three and six months ended June 30, 2012, compared to the same periods in 2011, from $1.8 million and $3.9 million to $3.3 million and $7.9 million, respectively. The increase in operating income was primarily the result of the elimination of royalty fees and lower professional fees in our Russian markets related to the termination of the Company’s contract with NutriPlus LLC, offset by lower net sales in our Japan, Mexico and Peru markets.

 

Operating income for Synergy WorldWide increased $0.3 million and $0.2 million for the three and six months ended June 30, 2012, respectively, compared to the same periods in 2011, from $2.5 million and $4.3 million to $2.8 million and $4.5 million, respectively. The increase in operating income is primarily due to net sales growth in our European and Korean markets offset by the decreased sales in Japan and the negative effect of foreign currency fluctuations.

 

Other Income (Expense), Net

 

Other income (expense), net for the three and six months ended June 30, 2012 increased $0.6 million and $0.2 million, respectively, compared to the same periods in 2011. The increase in other income, net in 2012 is due to decreased foreign exchange losses in 2012 compared to 2011 offset by the receipt of $0.7 million in restricted cash in Venezuela that had been previously written-down that was recovered in 2011.

 

Income Taxes

 

Interim income taxes are based on an estimated annualized effective tax rate applied to the respective quarterly periods, adjusted for discrete tax items in the periods in which they occur. For the three months ended June 30, 2012 and 2011, the Company’s provision for income taxes, as a percentage of income before income taxes was 30.5 percent and 26.4 percent, respectively, compared with a U.S. federal statutory rate of 35.0 percent.  For the six months ended June 30, 2012 and 2011, the Company’s provision for income taxes, as a percentage of income before income taxes was 25.7 percent and 21.1 percent, respectively, compared with a U.S. federal statutory rate of 35.0 percent.

 

The differences between the effective tax rates and the U.S. federal statutory tax rate for the three months ended June 30, 2012 were primarily attributed to a domestic valuation allowance release related to the utilization of foreign tax credits (-3.4 percent), in addition to net favorable foreign items related to foreign tax rate differences, the impact of unremitted earnings, and adjustments to foreign valuation allowances (-2.2 percent).

 

The differences between the effective tax rates and the U.S. federal statutory rate for the three months ended June 30, 2011 were primarily attributed to a decrease in deferred tax liabilities related to taxes on unremitted foreign earnings (-3.5 percent).

 

The differences between the effective tax rate and the U.S. federal statutory tax rate for the six months ended June 30, 2012 were primarily attributed to a domestic valuation allowance release related to the utilization of foreign tax credits (-6.4 percent), in addition to net favorable foreign items related to foreign tax rate differences, the impact of unremitted earnings, and adjustments to foreign valuation allowances (-4.1 percent).

 

The differences between the effective tax rate and the U.S. federal statutory tax rate for the six months ended June 30, 2011 were primarily attributed to net decreases in tax liabilities associated with uncertain tax positions due to the expiration of the statute of limitations on certain liabilities in various foreign jurisdictions (-6.4%), in addition to a decrease in deferred tax liabilities related to taxes on unremitted foreign earnings (-5.7%).

 

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Table of Contents

 

The Company’s U.S. federal income tax returns for 2003 through 2007, and 2009 and 2010 are open to examination for federal tax purposes. The Company has several foreign tax jurisdictions that have open tax years from 2004 through 2011. The Internal Revenue Service (“IRS”) is currently conducting an audit of the Company’s U.S. federal income tax returns for the 2009 and 2010 tax years.

 

In October 2009, the IRS issued an examination report formally proposing adjustments with respect to the 2003 through 2005 taxable years, which primarily relate to the prices that were charged in intra-group transfers of property and the disallowance of related deductions. The Company challenged the IRS proposals, and took the matter before the Office of Appeals of the Internal Revenue Service.  A settlement was reached with IRS Appeals and a proposed settlement agreement was signed by NSP in January 2012. The Company has made all required payments as of June 30, 2012 related to this matter and, absent further comment from the IRS, the examination period for the 2003 through 2005 taxable years will close on December 31, 2012.

 

During 2011, the IRS issued an examination report formally proposing adjustments with respect to the 2006 through 2008 taxable years.  As with the previous examination cycle discussed above, the adjustments relate primarily to the prices that were charged in intra-group transfers of property and the disallowance of related deductions.  The Company reached a settlement of the issues with the IRS examination team and an agreement was signed by the Company in January 2012.  On March 7, 2012, the Company received a letter from the IRS examination team stating that they accepted the examination report and do not plan to make additional changes. The Company has made all required payments as of June 30, 2012 related to this matter and, absent further comment from the IRS, the examination period for the 2006 through 2007 taxable years will close on September 15, 2012. The examination period for the 2008 taxable year previously closed on March 15, 2012.

 

As of June 30, 2012, the Company had accrued $9,784 related to unrecognized tax positions compared with $10,426 as of December 31, 2011. This net decrease was primarily attributed to the expiration of the statute of limitations on certain liabilities in various foreign jurisdictions.

 

Changes to the effective rate due to dividends received from foreign subsidiaries, impact of foreign tax credits and the unremitted earnings calculation are expected to be recurring; however, depending on various factors, the changes may be favorable or unfavorable in a particular period. The Company’s aggregate consolidated effective tax rate will typically reflect differences between the lower statutory rates in foreign markets compared to the U.S. statutory rate of 35 percent. Given the large number of jurisdictions in which the Company does business and the number of factors that can impact effective tax rates in any given year, the consolidated effective rate is likely to reflect relatively significant fluctuations from year-to-year.

 

Although the Company believes its estimates related to its unrecognized tax benefits are reasonable, the Company can provide no assurances that the final tax outcome of these matters will not be different from that which it has reflected in its historical income tax provisions and accruals. Any difference in the final tax outcome of these matters could have a material impact on the Company’s income tax provision and operating results in the periods in which the Company makes such determination.

 

Product Categories

 

Our line of over 700 products includes herbal products, vitamin, mineral and other nutritional supplements, personal care products and other complementary products such as sales aids. We purchase herbs and other raw materials in bulk and, after quality control testing, we formulate, encapsulate, tablet or concentrate them, and package them for shipment. Most of our products are manufactured at our facility in Spanish Fork, Utah. Contract manufacturers produce some of our vitamin, mineral and other nutritional supplements, personal care products and certain other miscellaneous 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.

 

Presented below are the U.S. dollar amounts and associated revenue percentages from the sale of herbal products, vitamin, mineral and other nutritional supplements, personal care products, and other complementary products for the three and six months ended June 30, 2012 and 2011, by business segment. The Company has two business segments that operate under the Nature’s Sunshine Products brand and are divided based on their geographic operations in the United States (NSP United States) and in countries outside the United States (NSP International). The Company’s third business segment operates under the Synergy WorldWide brand, which distributes its products through different marketing and distributor compensation plans and products with formulations that are sufficiently different from those of the NSP United States and NSP International to warrant accounting for these operations as a separate business segment.

 

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Table of Contents

 

 

 

Three Months Ended
June 30,

 

 

 

2012

 

2011

 

NSP United States:

 

 

 

 

 

 

 

 

 

Herbal Products

 

$

19,454

 

54.8

%

$

19,310

 

53.8

%

Vitamin, Mineral and Other Nutritional Supplements

 

14,402

 

40.5

 

14,316

 

39.9

 

Personal Care Products

 

1,005

 

2.8

 

1,146

 

3.2

 

Other Products

 

661

 

1.9

 

1,125

 

3.1

 

 

 

35,522

 

100.0

%

35,897

 

100.0

%

 

 

 

 

 

 

 

 

 

 

NSP International:

 

 

 

 

 

 

 

 

 

Herbal Products

 

$

16,598

 

53.2

%

$

17,561

 

53.1

%

Vitamin, Mineral and Other Nutritional Supplements

 

12,087

 

38.7

 

11,975

 

36.2

 

Personal Care Products

 

2,202

 

7.0

 

3,039

 

9.2

 

Other Products

 

336

 

1.1

 

480

 

1.5

 

 

 

31,223

 

100.0

%

33,055

 

100.0

%

 

 

 

 

 

 

 

 

 

 

Synergy WorldWide:

 

 

 

 

 

 

 

 

 

Herbal Products

 

$

11,530

 

44.0

%

$

9,944

 

43.5

%

Vitamin, Mineral and Other Nutritional Supplements

 

13,028

 

49.6

 

11,102

 

48.6

 

Personal Care Products

 

1,188

 

4.5

 

1,208

 

5.3

 

Other Products

 

500

 

1.9

 

605

 

2.6

 

 

 

26,246

 

100.0

%

22,859

 

100.0

%

 

 

 

 

 

 

 

 

 

 

Consolidated:

 

 

 

 

 

 

 

 

 

Herbal Products

 

$

47,582

 

51.2

%

$

46,815

 

51.0

%

Vitamin, Mineral and Other Nutritional Supplements

 

39,517

 

42.5

 

37,393

 

40.7

 

Personal Care Products

 

4,395

 

4.7

 

5,393

 

5.9

 

Other Products

 

1,497

 

1.6

 

2,210

 

2.4

 

 

 

$

92,991

 

100.0

%

$

91,811

 

100.0

%

 

22



Table of Contents

 

 

 

Six Months Ended
June 30,

 

 

 

2012

 

2011

 

NSP United States:

 

 

 

 

 

 

 

 

 

Herbal Products

 

$

38,201

 

54.3

%

$

37,903

 

53.0

%

Vitamin, Mineral and Other Nutritional Supplements

 

28,765

 

40.9

 

28,924

 

40.4

 

Personal Care Products

 

2,006

 

2.8

 

2,317

 

3.2

 

Other Products

 

1,386

 

2.0

 

2,398

 

3.4

 

 

 

70,358

 

100.0

%

71,542

 

100.0

%

 

 

 

 

 

 

 

 

 

 

NSP International:

 

 

 

 

 

 

 

 

 

Herbal Products

 

$

35,275

 

53.5

%

$

37,742

 

54.2

%

Vitamin, Mineral and Other Nutritional Supplements

 

25,154

 

38.2

 

25,578

 

36.8

 

Personal Care Products

 

4,716

 

7.1

 

5,345

 

7.7

 

Other Products

 

767

 

1.2

 

937

 

1.3

 

 

 

65,912

 

100.0

%

69,602

 

100.0

%

 

 

 

 

 

 

 

 

 

 

Synergy WorldWide:

&