Back to GetFilings.com



 

SECURITIES AND EXCHANGE COMMISSION

 

Washington, D.C. 20549

 


 

FORM 10-Q

 

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

 

For the Quarterly Period Ended
June 30, 2003

 

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
incorporation or organization)

 

(IRS Employer
Identification No.)

 

 

 

75 East 1700 South
Provo, Utah  84606

(Address of principal executive offices and zip code)

 

 

 

(801) 342-4300

(Registrant’s telephone number)

 

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 ý  No

 

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).

Yes ý  No

 

The number of shares of Common Stock, no par value, outstanding on August 13, 2003 was 13,917,901 shares.

 

When we refer in this Form 10-Q to the “Company,” “we,” “our,” and “us,” we mean Nature’s Sunshine Products, Inc., a Utah corporation, together with our subsidiaries.

 

 



 

NATURE’S SUNSHINE PRODUCTS, INC.

FORM 10-Q

 

For the Quarter Ended June 30, 2003

 

Table of Contents

 

Part I.  Financial Information

 

 

 

Item 1.

Unaudited Financial Statements

 

 

 

 

Condensed Consolidated Balance Sheets

 

 

Condensed Consolidated Statements of Income and Comprehensive Income

 

 

Condensed Consolidated Statements of Cash Flows

 

 

Notes to Condensed Consolidated Financial Statements

 

 

 

Item 2.

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

 

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

 

 

 

Item 4.

Disclosure Controls and Procedures

 

 

 

 

Item 5.

Submission of Matters to a Vote of Security Holders

 

 

Part II.  Other Information

 

 

 

Item 6.

Exhibits and Reports on Form 8-K

 

2



 

PART I  FINANCIAL INFORMATION

 

Item 1FINANCIAL STATEMENTS

 

NATURE’S SUNSHINE PRODUCTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in Thousands)

(Unaudited)

 

 

 

June 30,
2003

 

December 31,
2002

 

ASSETS

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

Cash and cash equivalents

 

$

25,126

 

$

26,175

 

Accounts receivable, net

 

4,994

 

5,247

 

Inventories, net

 

26,661

 

26,460

 

Deferred income tax assets

 

5,777

 

4,423

 

Prepaid expenses and other

 

10,121

 

6,923

 

Total current assets

 

72,679

 

69,228

 

 

 

 

 

 

 

PROPERTY, PLANT AND EQUIPMENT, net

 

34,090

 

34,621

 

LONG-TERM INVESTMENTS

 

7,820

 

10,389

 

DEFINITE-LIVED INTANGIBLE ASSETS, net

 

2,589

 

3,050

 

OTHER ASSETS

 

4,294

 

4,634

 

 

 

$

121,472

 

$

121,922

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

Line of credit

 

$

10,000

 

$

5,500

 

Accounts payable

 

5,520

 

2,979

 

Accrued volume incentives

 

10,783

 

9,842

 

Accrued liabilities

 

15,573

 

13,813

 

Income taxes payable

 

1,873

 

2,989

 

Total current liabilities

 

43,749

 

35,123

 

 

 

 

 

 

 

LONG-TERM LIABILITIES:

 

 

 

 

 

Deferred income tax liabilities

 

1,859

 

1,414

 

Deferred compensation

 

1,893

 

1,485

 

Total long-term liabilities

 

3,752

 

2,899

 

 

 

 

 

 

 

SHAREHOLDERS’ EQUITY:

 

 

 

 

 

Common Stock, no par value; 20,000 shares authorized, 19,446 shares issued

 

29,735

 

31,332

 

Retained earnings

 

123,556

 

121,789

 

Treasury stock, at cost, 5,528 and 4,314 shares, respectively

 

(61,130

)

(51,891

)

Accumulated other comprehensive loss

 

(18,190

)

(17,330

)

Total shareholders’ equity

 

73,971

 

83,900

 

 

 

$

121,472

 

$

121,922

 

 

See accompanying notes to condensed consolidated financial statements.

 

3



 

NATURE’S SUNSHINE PRODUCTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME

(Amounts in Thousands, Except Per-Share Information)

(Unaudited)

 

 

 

Three Months Ended
June 30,

 

 

 

2003

 

2002

 

 

 

 

 

 

 

SALES REVENUE

 

$

73,211

 

$

77,920

 

 

 

 

 

 

 

COST AND EXPENSES:

 

 

 

 

 

Cost of goods sold

 

12,912

 

13,704

 

Volume incentives

 

32,422

 

34,430

 

Selling, general and administrative

 

25,145

 

25,912

 

 

 

 

 

 

 

OPERATING INCOME

 

2,732

 

3,874

 

 

 

 

 

 

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

Impairment of investment

 

(1,768

)

 

Interest income

 

129

 

160

 

Interest expense

 

(85

)

(1

)

Other income, net

 

496

 

1,275

 

 

 

(1,228

)

1,434

 

 

 

 

 

 

 

INCOME BEFORE PROVISION FOR INCOME TAXES

 

1,504

 

5,308

 

PROVISION FOR INCOME TAXES

 

379

 

2,289

 

NET INCOME

 

1,125

 

3,019

 

OTHER COMPREHENSIVE INCOME (LOSS), net of tax:

 

 

 

 

 

Foreign currency translation adjustments

 

(423

)

(2,286

)

Net unrealized holding gains (losses) on marketable securities

 

731

 

(87

)

Reclassification adjustment for losses included in net income

 

333

 

34

 

 

 

641

 

(2,339

)

 

 

 

 

 

 

COMPREHENSIVE INCOME

 

$

1,766

 

$

680

 

 

 

 

 

 

 

BASIC NET INCOME  PER COMMON SHARE

 

$

0.08

 

$

0.19

 

WEIGHTED AVERAGE BASIC COMMON SHARES

 

13,895

 

16,088

 

DILUTED NET INCOME PER COMMON SHARE

 

$

0.08

 

$

0.18

 

WEIGHTED AVERAGE DILUTED COMMON SHARES

 

14,143

 

16,701

 

 

See accompanying notes to condensed consolidated financial statements.

 

4



 

NATURE'S SUNSHINE PRODUCTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

AND COMPREHENSIVE INCOME

(Amounts in Thousands, Except Per-Share Information)

(Unaudited)

 

 

 

Six Months Ended
June 30,

 

 

 

2003

 

2002

 

 

 

 

 

 

 

SALES REVENUE

 

$

145,352

 

$

153,780

 

 

 

 

 

 

 

COST AND EXPENSES:

 

 

 

 

 

Cost of goods sold

 

25,926

 

27,319

 

Volume incentives

 

64,522

 

67,805

 

Selling, general and administrative

 

49,957

 

52,999

 

 

 

 

 

 

 

OPERATING INCOME

 

4,947

 

5,657

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

Impairment of investments

 

(1,768

)

(3,000

)

Interest income

 

274

 

325

 

Interest expense

 

(130

)

(1

)

Other income, net

 

689

 

1,838

 

 

 

(935

)

(838

)

 

 

 

 

 

 

INCOME BEFORE PROVISION FOR INCOME TAXES

 

4,012

 

4,819

 

PROVISION FOR INCOME TAXES

 

1,283

 

2,688

 

NET INCOME

 

2,729

 

2,131

 

OTHER COMPREHENSIVE LOSS, net of tax:

 

 

 

 

 

Foreign currency translation adjustments

 

(1,118

)

(3,216

)

Net unrealized holding losses on marketable securities

 

(75

)

(627

)

Reclassification adjustment for losses included in net income

 

333

 

1,459

 

 

 

(860

)

(2,384

)

 

 

 

 

 

 

COMPREHENSIVE INCOME (LOSS)

 

$

1,869

 

$

(253

)

 

 

 

 

 

 

BASIC NET INCOME  PER COMMON SHARE

 

$

0.19

 

$

0.13

 

WEIGHTED AVERAGE BASIC COMMON SHARES

 

14,393

 

16,175

 

DILUTED NET INCOME  PER COMMON SHARE

 

$

0.19

 

$

0.13

 

WEIGHTED AVERAGE DILUTED COMMON SHARES

 

14,615

 

16,902

 

 

See accompanying notes to condensed consolidated financial statements.

 

5



 

NATURE’S SUNSHINE PRODUCTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in Thousands)

(Unaudited)

 

 

 

Six Months Ended
June 30,

 

 

 

2003

 

2002

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

Net income

 

$

2,729

 

$

2,131

 

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

 

 

 

 

 

Depreciation and amortization

 

3,296

 

4,391

 

Tax benefit from stock option exercises

 

108

 

289

 

(Gain) loss on sale of property, plant and equipment

 

(41

)

108

 

Deferred income taxes

 

(909

)

(2,223

)

Non-cash compensation

 

408

 

(62

)

Loss on impaired investments

 

1,768

 

3,000

 

Changes in assets and liabilities:

 

 

 

 

 

Accounts receivable, net

 

253

 

(206

)

Inventories, net

 

(201

)

(1,194

)

Prepaid expenses and other assets

 

(3,196

)

523

 

Accounts payable

 

2,541

 

(872

)

Accrued volume incentives

 

941

 

(1,392

)

Accrued liabilities

 

1,760

 

3,870

 

Income taxes payable

 

(1,116

)

(888

)

Cumulative foreign currency translation adjustments

 

(1,116

)

(3,578

)

Net Cash Provided By Operating Activities

 

7,225

 

3,897

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

Capital expenditures

 

(2,353

)

(2,572

)

Proceeds from sale of long-term investments

 

1,060

 

110

 

Payments received (advances) on long-term receivables

 

505

 

(111

)

Purchase of other assets

 

(200

)

(71

)

Proceeds from sale of property, plant and equipment

 

125

 

74

 

Net Cash  Used In Investing Activities

 

(863

)

(2,570

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

Net proceeds from line of credit

 

4,500

 

 

Payment of cash dividends

 

(962

)

(1,077

)

Purchase of treasury stock

 

(11,796

)

(6,010

)

Proceeds from exercise of stock options

 

849

 

1,001

 

Net Cash Used In Financing Activities

 

(7,409

)

(6,086

)

EFFECT OF EXCHANGE RATES ON CASH

 

(2

)

362

 

NET DECREASE IN CASH AND

 

 

 

 

 

CASH EQUIVALENTS

 

(1,049

)

(4,397

)

CASH AND CASH EQUIVALENTS AT

 

 

 

 

 

BEGINNING OF THE PERIOD

 

26,175

 

29,788

 

CASH AND CASH EQUIVALENTS AT

 

 

 

 

 

END OF THE PERIOD

 

$

25,126

 

$

25,391

 

 

See accompanying notes to condensed consolidated financial statements.

 

6



 

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 AND ACCOUNTING POLICIES

 

The unaudited, condensed consolidated financial statements of Nature’s Sunshine Products, Inc. and subsidiaries (together, the “Company”) included herein have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission.  Certain information and footnote disclosures normally required in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although the Company believes the following disclosures are adequate to make the information presented not misleading.

 

These condensed consolidated financial statements reflect all adjustments, which in the opinion of management are necessary to present fairly the Company’s financial position as of June 30, 2003, and the results of its operations and its cash flows for the periods presented.  All of the adjustments which have been made in these condensed consolidated financial statements are of a normal recurring nature.  Operating results for the three and six months ended June 30, 2003 are not necessarily indicative of the results that may be expected for the year ending December 31, 2003.

 

These condensed consolidated financial statements should 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, 2002.

 

(2)                RECENT ACCOUNTING PRONOUNCEMENTS

 

In May 2003, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity.” SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both debt and equity.  The provisions of SFAS No. 150 apply to the classification and disclosure requirements for the following three types of financial instruments:  Mandatorily Redeemable Instruments, Instruments with Repurchase Obligations, and Instruments with Obligations to Issue a Variable Number of Securities.  The new reporting and disclosure requirements for SFAS No. 150 become effective for the first interim period beginning after June 15, 2003 or for any covered instruments entered into or modified subsequent to May 31, 2003.  The Company believes that the adoption of SFAS No. 150 will not have an effect on the Company’s results of operations, liquidity, or financial position.

 

7



 

The FASB issued SFAS No. 143, “Accounting for Asset Retirement Obligations”, which provides the accounting requirements for retirement obligations associated with tangible long-lived assets.  SFAS No. 143 requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred. SFAS No. 143 was adopted January 1, 2003 and did not have an impact on the Company’s consolidated results of operations, financial position, or liquidity.

 

In April 2002, the FASB issued SFAS No. 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections,” which eliminates the requirement to report gains and losses from extinguishment of debt as extraordinary unless they meet the criteria of APB Opinion 30. SFAS No. 145 also amends other existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions. SFAS No. 145 becomes effective for the Company for the year ending December 31, 2003. The Company does not expect the adoption of this pronouncement to have a material impact on the Company’s financial position, results of operations, or liquidity.

 

In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” SFAS No. 146 requires the recognition of a liability for costs associated with an exit or disposal activity to be recorded at fair value when incurred. A company’s commitment to a plan, by itself, does not create a present obligation that meets the definition of a liability. SFAS No. 146 became effective for exit or disposal activities initiated after December 31, 2002. The Company’s adoption of this pronouncement did not have an impact on the Company’s financial position, results of operations, or cash flows.

 

In November 2002, the FASB issued FASB Interpretation (“FIN”) No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others — an Interpretation of FASB Statements No. 5, 57, and 107 and Rescission of FASB Interpretation No. 34.”  FIN No. 45 elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued.  It also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee.  The initial recognition and initial measurement provisions of FIN No. 45 are to be applied on a prospective basis to guarantees issued or modified after December 31, 2002.  The disclosure requirements of FIN No. 45 became effective for financial statements of interim or annual periods ended after December 15, 2002.  The adoption of FIN No. 45 did not have an effect on the Company’s results of operations, liquidity, or financial position.

 

In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure” — an amendment of SFAS No. 123. SFAS No. 148 amends SFAS No. 123, “Accounting for Stock-Based Compensation,” to provide alternative methods of transition

 

8



 

for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The Company has made the required disclosures in Note 9.

 

In January 2003, the FASB issued FASB Interpretation (“FIN”) No. 46, “Consolidation of Variable Interest Entities — An Interpretation of ARB No. 51”. FIN No. 46 addresses consolidation and reporting by business enterprises of variable interest entities.  All enterprises with variable interests in variable interest entities created after January 31, 2003 must apply the provisions of FIN No. 46 to those entities immediately.  A public entity with a variable interest in a variable interest entity created before February 1, 2003 must apply the provisions of FIN No. 46 to that entity no later than the beginning of the first interim or annual reporting period beginning after June 15, 2003.  The adoption of FIN No. 46 is not expected to have an effect on the Company’s results of operations, liquidity, or financial position.

 

(3)                                 INVENTORIES

 

Inventories consist of the following:

 

 

 

June 30,
2003

 

December 31,
2002

 

Raw materials

 

$

7,591

 

$

6,741

 

Work in process

 

1,074

 

822

 

Finished goods

 

17,996

 

18,897

 

 

 

$

26,661

 

$

26,460

 

 

(4)                                 INTANGIBLE ASSETS

 

The composition of the Company’s definite-lived intangible assets, is as follows:

 

 

 

As of June 30, 2003

 

As of December 31, 2002

 

 

 

Carrying
Amount

 

Accumulated
Amortization

 

Net

 

Carrying
Amount

 

Accumulated
Amortization

 

Net

 

Patents and Trademarks

 

$

464

 

$

399

 

$

65

 

$

464

 

$

309

 

$

155

 

Acquired Distributor Networks

 

4,503

 

2,069

 

2,434

 

4,503

 

1,701

 

2,802

 

Product Registrations

 

319

 

229

 

90

 

293

 

200

 

93

 

Total

 

$

5,286

 

$

2,697

 

$

2,589

 

$

5,260

 

$

2,210

 

$

3,050

 

 

9



 

As of June 30, 2003, the Company has determined that none of its intangible assets are impaired. Amortization expense for intangible assets for the six months ended June 30, 2003, was $487.  Estimated amortization expense for the remainder of 2003 and the five succeeding fiscal years follows:

 

 

 

Estimated
Amortization
Expense

 

2003 (remainder)

 

$

472

 

2004

 

343

 

2005

 

305

 

2006

 

304

 

2007

 

302

 

2008

 

299

 

 

(5)                                NET INCOME PER COMMON 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.

 

As of June 30, 2003, the Company had a total of 3,431 common stock options outstanding.  These options were granted at fair market value and have a weighted-average exercise price of $8.27 per share.

 

10



 

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, 2003 and 2002.

 

 

 

Net Income
(Numerator)

 

Shares
(Denominator)

 

Per Share
Amount

 

Three Months Ended June 30, 2003

 

 

 

 

 

 

 

Basic EPS

 

$

1,125

 

13,895

 

$

0.08

 

Effect of stock options

 

 

248

 

 

Diluted EPS

 

$

1,125

 

14,143

 

$

0.08

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 2002

 

 

 

 

 

 

 

Basic EPS

 

$

3,019

 

16,088

 

$

0.19

 

Effect of stock options

 

 

613

 

(0.01

)

Diluted EPS

 

$

3,019

 

16,701

 

$

0.18

 

 

 

 

Net Income
(Numerator)

 

Shares
(Denominator)

 

Per Share
Amount

 

Six Months Ended June 30, 2003

 

 

 

 

 

 

 

Basic EPS

 

$

2,729

 

14,393

 

$

0.19

 

Effect of stock options

 

 

222

 

 

Diluted EPS

 

$

2,729

 

14,615

 

$

0.19

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2002

 

 

 

 

 

 

 

Basic EPS

 

$

2,131

 

16,175

 

$

0.13

 

Effect of stock options

 

2

 

727

 

 

Diluted EPS

 

$

2,131

 

16,902

 

$

0.13

 

 

For the three and six months ended June 30, 2003 and 2002, there were outstanding options to purchase 393 and 623 shares of common stock, respectively, that were not included in the computation of Diluted EPS, as their effect would have been anti-dilutive.  For the six months ended June 30, 2003 and 2002 there were outstanding options to purchase 424 and 230 shares of common stock, respectively, that were not included in the computation of Diluted EPS, as their effect would have been anti-dilutive.

 

(6)                                EQUITY TRANSACTIONS

 

The Company has declared consecutive quarterly cash dividends since 1988. During the second quarter, the Company paid a dividend of 3 1/3 cents per common share on May 30, 2003, to shareholders of record on May 23, 2003.

 

For the three and six months ended June 30, 2003, the Company repurchased 138 and 1,326 shares, respectively, of its common stock at an average price per share of $8.78 and $8.89, respectively. Upon completion of its authorized buyback program instituted in September 2002, the Company’s Board of Directors authorized another 1,000-share buyback program on March 19, 2003. As of June 30, 2003, the Company had repurchased a cumulative total of 1,000 shares under this new authorization.

 

11



 

(7)                                OPERATING LINE OF CREDIT

 

During 2002, the Company entered into an operating line of credit with an interest rate equal to LIBOR (1.10 percent as of June 30, 2003) plus 1.5 percent, which provides for borrowings of up to $15,000,000.  Borrowings under this line of credit may be used to repurchase common shares of the Company’s outstanding stock under Board-authorized repurchase programs as well as to fund working capital, capital expenditures and related costs.  The line of credit is unsecured and matures July 1, 2004.  The outstanding borrowings under this line of credit at June 30, 2003 totaled $10,000. The line of credit contains other terms and conditions as well as affirmative and negative financial covenants. As of June 30, 2003, the Company was in compliance with these covenants.

 

(8)                                ACCUMULATED OTHER COMPREHENSIVE LOSS

 

The composition of accumulated other comprehensive loss, net of tax, is as follows:

 

 

 

Foreign Currency
Translation
Adjustments

 

Unrealized Gains
(Losses) On
Available-For-
Sale Securities

 

Total
Accumulated Other
Comprehensive
Loss

 

Balance as of December 31, 2002

 

$

(17,278

)

$

(52

)

$

(17,330

)

Period Change

 

(1,118

)

258

 

(860

)

Balance as of June 30, 2003

 

$

(18,396

)

$

206

 

$

(18,190

)

 

12



 

(9)                                 STOCK BASED COMPENSATION

 

The Company accounts for stock-based compensation plans for employees and directors under Accounting Principles Board Opinion No. 25, under which no compensation cost has been recognized in the accompanying consolidated statements of income for the three and six months ended June 30, 2003 and 2002.  Had compensation cost been determined consistent with SFAS No. 123, “Accounting for Stock-Based Compensation”, the Company’s net income and net income per share would have been reduced to the following pro forma amounts:

 

 

 

Three Months Ended
June 30,

 

 

 

2003

 

2002

 

Net Income

As reported

 

$

1,125

 

$

3,019

 

 

Stock option expense, net of related tax effects

 

(58

)

(217

)

 

Pro forma

 

$

1,067

 

$

2,802

 

 

 

 

 

 

 

Basic Net Income Per Share

As reported

 

$

0.08

 

$

0.19

 

 

Stock option expense, net of related tax effects

 

 

(0.01

)

 

Pro forma

 

$

0.08

 

$

0.18

 

 

 

 

 

 

 

Diluted Net Income Per Share

As reported

 

$

0.08

 

$

0.18

 

 

Stock option expense, net of related tax effects

 

 

(0.01

)

 

Pro forma

 

$

0.08

 

$

0.17

 

 

 

 

Six Months Ended
June 30,

 

 

 

2003

 

2002

 

Net Income

As reported

 

$

2,729

 

$

2,131

 

 

Stock option expense, net of related tax effects

 

(113

)

(435

)

 

Pro forma

 

$

2,616

 

$

1,696

 

 

 

 

 

 

 

Basic Net Income Per Share

As reported

 

$

0.19

 

$

0.13

 

 

Stock option expense, net of related tax effects

 

(0.01

)

(0.03

)

 

Pro forma

 

$

0.18

 

$

0.10

 

 

 

 

 

 

 

Diluted Net Income Per Share

As reported

 

$

0.19

 

$

0.13

 

 

Stock option expense, net of related tax effects

 

(0.01

)

(0.03

)

 

Pro forma

 

$

0.18

 

$

0.10

 

 

13



 

(10)                          SEGMENT INFORMATION

 

The Company has four operating segments.  These operating segments are components of the Company for which separate information is available that is evaluated regularly in deciding how to allocate resources and assess performance.  The Company evaluates performance based on operating income.

 

The Company’s operating segments are based on geographic operations.  Intersegment sales are eliminated in consolidation and are not material.

 

Operating segment information is as follows:

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

 

2003

 

2002

 

2003

 

2002

 

Sales Revenue:

 

 

 

 

 

 

 

 

 

United States

 

$

44,603

 

$

45,344

 

$

89,367

 

$

89,495

 

International:

 

 

 

 

 

 

 

 

 

Latin America

 

14,272

 

16,848

 

27,166

 

32,602

 

Asia Pacific

 

6,139

 

9,244

 

12,713

 

19,274

 

Other

 

8,197

 

6,484

 

16,106

 

12,409

 

 

 

73,211

 

77,920

 

145,352

 

153,780

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

United States

 

42,525

 

43,022

 

84,962

 

86,097

 

International:

 

 

 

 

 

 

 

 

 

Latin America

 

12,922

 

15,103

 

24,815

 

29,984

 

Asia Pacific

 

7,746

 

10,118

 

15,834

 

20,608

 

Other

 

7,286

 

5,803

 

14,794

 

11,434

 

 

 

70,479

 

74,046

 

140,405

 

148,123

 

Operating Income (Loss):

 

 

 

 

 

 

 

 

 

United States

 

2,078

 

2,322

 

4,405

 

3,398

 

International:

 

 

 

 

 

 

 

 

 

Latin America

 

1,350

 

1,745

 

2,351

 

2,618

 

Asia Pacific

 

(1,607

)

(874

)

(3,121

)

(1,334

)

Other

 

911

 

681

 

1,312

 

975

 

 

 

2,732

 

3,874

 

4,947

 

5,657

 

Other Income (Expense)

 

(1,228

)

1,434

 

(935

)

(838

)

Income Before Provision for Income Taxes

 

$

1,504

 

$

5,308

 

$

4,012

 

$

4,819

 

 

Segment assets as of June 30, 2003 and December 31, 2002, are as follows:

 

 

 

June 30,
2003

 

December 31,
2002

 

Assets:

 

 

 

 

 

United States

 

$

77,905

 

$

79,512

 

International:

 

 

 

 

 

Latin America

 

26,566

 

26,447

 

Asia Pacific

 

11,897

 

11,871

 

Other

 

5,104

 

4,092

 

Total Assets

 

$

121,472

 

$

121,922

 

 

14



 

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

 

The following discussion should be read in conjunction with the interim financial information included in this Form 10-Q 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, 2002.

 

Critical Accounting Policies

 

Revenue Recognition

 

We generally recognize sales revenue when products are shipped and title passes to our independent distributors. For most product sales, the sales price is received in the form of cash or credit card payment, which accompanies or precedes the shipment of the orders. As products are shipped, persuasive evidence of an arrangement exists, delivery has occurred, the price to the buyer is fixed, and collectibility is reasonably assured. A reserve for product returns, which reduces revenue, is accrued based on historical experience. From time to time, our United States operation extends short-term credit associated with product promotions. For certain of our international operations, we offer credit terms consistent with industry standards within each respective country. Amounts received for unshipped merchandise are not recognized as revenue but rather they are recorded as customer deposits and are included in accrued liabilities.

 

Volume Incentives Accrual

 

We accrue for volume incentives expense associated with our sales revenue. Volume incentives are a significant part of our direct sales marketing program and represent commission payments made to our independent Distributors and Managers. We specifically analyze volume incentives based on historical and current sales trends when evaluating the adequacy of the accrued volume incentives.

 

Self-insurance Liabilities

 

We self-insure for certain employee medical and specific product liabilities. The recorded liabilities for self-insured risks are calculated using actuarial methods and are not discounted. The liabilities include amounts for actual claims and claims incurred but not reported. Actual experience, including claim frequency and severity as well as health care inflation, could result in actual liabilities being more or less than the amounts currently recorded.

 

15



 

Incentive Trip Accrual

 

We accrue for expenses of incentive trips associated with our direct sales marketing program, which rewards independent Distributors and Managers with paid attendance at 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 result in liabilities being more or less than the amounts recorded.

 

RESULTS OF OPERATIONS

 

The following table identifies for the three month periods (i) the relationship that net income items disclosed in the condensed consolidated financial statements have to total sales, and (ii) the amount and percent of change of such items compared to the corresponding prior period.

 

 

 

 

 

(Dollar Amounts in Thousands)
(Unaudited)

 

 

 

 

 

(i)
Income and Expense
Items as a Percent of Sales
Three Months Ended
June 30,

 

(ii)
Three Months Ended June 30,
2003 to 2002

 

Income and
Expense Items

 

2003

 

2002

 

Amount of
Increase
(Decrease)

 

Percent
of
Change

 

Sales

 

100.0

%

100.0

%

$

(4,709

)

(6.0

)%

 

 

 

 

 

 

 

 

 

 

Cost of goods sold

 

17.6

 

17.6

 

(792

)

(5.8

)

Volume incentives

 

44.3

 

44.2

 

(2,008

)

(5.8

)

SG&A expenses

 

34.4

 

33.2

 

(767

)

(3.0

)

Total operating expenses

 

96.3

 

95.0

 

(3,567

)

(4.8

)

Operating income

 

3.7

 

5.0

 

(1,142

)

(29.5

)

Other income (expense), net

 

(1.6

)

1.8

 

(2,662

)

(185.6

)

Income  before provision for income taxes

 

2.1

 

6.8

 

(3,804

)

(71.7

)

Provision for income taxes

 

0.6

 

2.9

 

(1,910

)

(83.5

)

Net income

 

1.5

%

3.9

%

$

(1,894

)

(62.7

)%

 

16



 

The following table identifies for the six month periods (i) the relationship that net income items disclosed in the condensed consolidated financial statements have to total sales, and (ii) the amount and percent of change of such items compared to the corresponding prior period.

 

 

 

 

(Dollar Amounts in Thousands)

(Unaudited)

 

 

 

Income and
Expense Items

 

(i)
Income and Expense
Items as a Percent of Sales
Six Months Ended
June 30,

 

(ii)
Six Months Ended June 30,
2003 to 2002

 

 

 

 

 

 

2003

 

2002

 

Amount of
Increase
(Decrease)

 

Percent
of
Change

 

Sales

 

100.0

%

100.0

%

$

(8,428

)

(5.5

)%

 

 

 

 

 

 

 

 

 

 

Cost of goods sold

 

17.8

 

17.8

 

(1,393

)

(5.1

)

Volume incentives

 

44.4

 

44.1

 

(3,283

)

(4.8

)

SG&A expenses

 

34.4

 

34.4

 

(3,042

)

(5.7

)

Total operating expenses

 

96.6

 

96.3

 

(7,718

)

(5.2

)

Operating income

 

3.4

 

3.7

 

(710

)

(12.6

)

Other income (expense), net

 

(0.6

)

(0.6

)

(97

)

(11.6

)

Income before provision for income taxes

 

2.8

 

3.1

 

(807

)

(16.7

)

Provision for income taxes

 

0.9

 

1.7

 

(1,405

)

(52.3

)

Net income

 

1.9

%

1.4

%

$

598

 

28.1

%

 

17



 

Sales Revenue

 

Sales revenue for the three months ended June 30, 2003, was $73.2 million compared to $77.9 million for the same period in the prior year, a decrease of approximately 6.0 percent. Sales revenue for the six months ended June 30, 2003, was $145.4 million compared to $153.8 million for the same period in the prior year, a decrease of approximately 5.5 percent. The decrease in sales revenue for the three and six months ended June 30, 2003, primarily reflects lower sales revenue in our international operations.

 

Sales revenue in our United States operation for the three and six months ended June 30, 2003, was $44.6 million and $89.4 million, respectively, a decrease of approximately 1.6 percent and 0.0 percent, respectively, compared to the same period in the prior year.  The sales decrease resulted from lower sales volumes offset, in part, by a price increase effected on April 1, 2003.  During the third and fourth quarters of 2002, the Company instituted new marketing and promotional activities designed to aid Distributors in building their business. We expect to see benefits from those programs continue for the remainder of 2003.

 

Our international operations reported sales revenue of $28.6 million and $56.0 million  for the three and six months ended June 30, 2003, respectively, a decrease of approximately 12.2 percent and 12.9 percent, respectively, compared to the same periods in the prior year.

 

Sales revenue in Latin America was $14.3 million and $27.2 million for the three and six months ended June 30, 2003, respectively, a decrease of 15.3 percent and 16.7 percent, respectively, compared to the same period in the prior year.  The sales revenue decline experienced in Latin America was primarily due to the devaluation of the Venezuelan Bolivar due to the unstable economic environment in Venezuela as well as import restrictions imposed by the Brazilian government and the devaluation of the Brazilian Real.  The economic and political environment in Venezuela continues to adversely affect the Company.  The Venezuelan government is increasingly becoming adverse to foreign companies.  Sales from Venezuela accounted for 2.4% and 2.1% of total sales for the three and six months ended June 30, 2003.  Total assets in Venezuela were 2,535,000 as of June 30, 2003.  We expect to continue to be negatively impacted from the unstable economic and political environment and the devaluation of the Venezuelan Bolivar.

 

Sales revenue in Asia Pacific was $6.1 million and $12.7 million for the three and six months ended June 30, 2003, respectively, a decrease of 33.6 percent and 34.0 percent, respectively,  compared to the same periods in the prior year.  The sales revenue decline experienced in our Asia Pacific markets is primarily the result of continued sales revenue decreases experienced by South Korea due to increased competition.

 

18



 

Sales revenue in our other markets was $8.2 million and $16.1 million for the three and six months ended June 30, 2003, respectively, an increase of 26.4 percent and 29.8 percent, respectively, compared to the same periods in the prior year.  The growth in sales revenue experienced in our other markets is primarily due to the positive results of our operations in the Russian Federation as well as the United Kingdom.

 

Our independent sales force consists of Managers and Distributors.  A Distributor interested in earning additional income by committing more time and effort to selling our products may attain the rank of “Manager”.  Appointment as a Manager is dependent upon attaining certain volume levels and demonstrating leadership abilities.  The number of Managers at June 30, 2003, was approximately 15,200 compared to approximately 14,000 as of December 31, 2002.  The number of Distributors at June 30, 2003, was approximately 525,000 compared to approximately 509,000 as of December 31, 2002. The United States and Russian operations account for the majority of the increase in Managers and Distributors since December 31, 2002 due to favorable sales trends in those locations in recent months.

 

Cost of Goods Sold

 

For the three and six months ended June 30, 2003, cost of goods sold remained essentially constant, as a percent of sales, compared to the same period in the prior year.  We expect cost of goods sold to decrease slightly as a percent of sales during the remainder of 2003 compared to the six months ended June 30, 2003 due to the price increase put in place on April 1, 2003 and also due to the expected stabilization or strengthening of certain foreign currencies.

 

Volume Incentives

 

Volume incentives are commissions paid to independent sales force members for reaching certain levels of sales revenue performance and organizational development and are an integral part of our direct sales marketing program.  Volume incentives vary slightly, on a percentage basis, by product due to our pricing policies.  For the three and six months ended June 30, 2003, volume incentives, as a percent of sales, increased slightly compared to the same period in the prior year primarily as a result of the increase in the United States sales revenue where volume incentives are slightly higher. We expect volume incentives to remain constant, as a percent of sales, during the remainder of 2003 compared to the six months ended June 30, 2003.

 

Selling, General and Administrative

 

Selling, general and administrative expenses for the three and six months ended June 30, 2003, decreased $0.8 million and $3.0 million, respectively, compared to the same period of the prior year as a result of the cost control measures put in place during the latter part of 2002. For the remainder of 2003, we expect selling, general and administrative expenses, as a percent of sales, to decrease slightly as compared to the six months ended June 30, 2003, as a result of continued benefits from cost controls implemented in 2002.

 

19



 

Other Income (Expense)

 

Other income (expense) for the three months ended June 30, 2003, decreased approximately $2.7 million compared to the same period of the prior year, primarily as a result of a combination of an impairment of an equity investment in HealtheTech Corporation of $1.8 million and a reduction of  foreign exchange transaction gains in certain of our subsidiaries in the second quarter of 2003.

 

Income Tax

 

The effective income tax rate for the three and six months ended June 30, 2003, was 25.2 percent and 32.0 percent, respectively, compared to 43.1 percent and 55.8 percent for the same periods in the prior year, respectively.  The decrease in the effective tax rate for the three and six months ended June 30, 2003, was primarily the result of the utilization of current year losses of certain foreign subsidiaries that had not been previously recognized as well as the reduction of taxable income due to dividends received that were taxed in prior years. For the remainder of the year ending December 31, 2003, management expects the annual effective income tax rate to be approximately 32 percent.

 

Product Liability

 

Similar to other manufacturers and distributors of products that are ingested, we face an inherent risk of exposure to product liability claims in the event that, among other things, the use of our products results in injury.  As a result of increased regulatory scrutiny of products that contain ephedrine alkaloids and kava, we have not been able to obtain product liability insurance covering such products.  Approximately 2 percent of our products contain some amount of ephedrine alkaloids and kava.  We carry insurance in the types and amounts we consider reasonably adequate to cover the other risks associated with our business.  Premiums for our product liability coverage applicable to our products that are insurable increased approximately 35 percent at June 1, 2002, providing significantly less coverage than that of the prior year. On June 1, 2003, we established a wholly owned captive insurance company to provide products liability insurance coverage for the Company. We have accrued an amount using the assistance of a third party actuary that we believe is sufficient to cover probable and reasonably estimable liabilities related to product liability claims based on our history of such claims.  However, there can be no assurance that these estimates will prove to be sufficient nor can there be any assurance that the ultimate outcome of any litigation for product liability will not have a material negative impact on our financial position, results of operations, or liquidity.

 

Segment Information

 

See information included in the condensed consolidated financial statements under Item 1 Note 10.

 

20



 

Balance Sheet

 

Allowance For Doubtful Accounts

 

The Company’s allowance for doubtful accounts did not significantly change from December 31, 2002 to June 30, 2003.

 

Accrued Liabilities

 

Accrued liabilities increased approximately $1.8 million as of June 30, 2003 compared to December 31, 2002, as a result of accruals for incentive trips associated with our direct sales marketing program, which rewards independent distributors and managers with paid attendance at our conventions.

 

LIQUIDITY AND CAPITAL RESOURCES

 

Cash and cash equivalents decreased approximately $1.0 million as of June 30, 2003 compared to December 31, 2002.  The decrease in cash and cash equivalents is primarily the result of our Board-authorized stock buyback program through which we repurchased 1,326 shares of our common stock in the open market for $11.8 million during the six months ended June 30, 2003.  These cash outflows were offset, in part, by cash provided by operating activities of $7.2 million and net proceeds from borrowings under our line of credit of $4.5 million.

 

We believe that working capital requirements can be met for the foreseeable future through our available cash and cash equivalents, cash generated from operating activities and borrowings from our operating line of credit; however, a prolonged economic downturn or a decrease in the demand for our products could adversely affect our long-term liquidity.  In the event of a significant decrease in cash provided by our operating activities, it might be necessary for us to obtain additional external sources of funding.

 

During 2002, the Company entered into an operating line of credit arrangement with a bank with an interest rate equal to LIBOR (1.1 percent as of June 30, 2003) plus 1.5 percent, which provides for borrowings of up to $15.0 million.  Borrowings under this line of credit may be used to repurchase common shares of the Company’s outstanding stock under Board-authorized repurchase programs as well as to fund working capital, capital expenditures and related costs.  The line of credit is unsecured and matures July 1, 2004.  The outstanding borrowings under this line of credit at June 30, 2003 totaled $10,000. The line of credit contains other terms and conditions as well as affirmative and negative financial covenants.  As of June 30, 2003, the Company is in compliance with all financial covenants.

 

Legal Proceedings

 

We are a defendant in various lawsuits which are incidental to our business.  After consultation with legal counsel, we believe that the ultimate disposition of these matters will not have a material adverse effect upon our consolidated results of operations, financial position, or liquidity.

 

21



 

Review by the Securities and Exchange Commission

 

On April 30, 2003, the Securities and Exchange Commission (“SEC”) notified us that the SEC’s accounting staff had reviewed our annual report filed on Form 10-K for the fiscal year ended December 31, 2002. They sent us a letter of comment which identified several accounting issues on which the staff sought clarification and additional information. We have provided a preliminary response letter to the staff and we are in the process of providing additional information in response to the staff’s request.

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations and other sections of this Form 10-Q may contain forward-looking statements.  Such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  Such statements may relate but not be limited to projections of revenues, income or loss, capital expenditures, plans for growth and future operations, financing needs, product liability claims and availability of insurance, as well as assumptions relating to the foregoing.  Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified.  When used in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, and elsewhere in this Form 10-Q the words “estimates”, “expects”, “anticipates”, “projects”, “plans”, “intends” and variations of such words and similar expressions are intended to identify forward-looking statements that involve risks and uncertainties.  Future events and actual results could differ materially from those set forth in, contemplated by, or underlying the forward-looking statements.

 

Item 3.           QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

We conduct our business in several countries and intend to continue to expand our foreign operations.  Sales revenue, operating income and net income are affected by fluctuations in currency exchange rates, interest rates and other uncertainties inherent in doing business and selling product in more than one currency.  In addition, our operations are exposed to risks associated with changes in social, political and economic conditions inherent in foreign operations, including changes in the laws and policies that govern foreign investment in countries where we have operations as well as, to a lesser extent, changes in United States laws and regulations relating to foreign trade and investment.

 

Foreign Currency Risk

 

During the six months ended June 30, 2003, approximately 38.5 percent of our revenue and 39.5 percent of our expenses were realized outside of the United States.  Inventory purchases are transacted primarily in U.S. dollars from vendors located in the United States.  The local currency of each international subsidiary is considered its functional currency, and all sales and expenses are translated at average exchange rates for the reported periods.  Therefore, our operating results will be impacted by a

 

22



 

weakening of the U.S. dollar and will be negatively impacted by a strengthening of the U.S. dollar.  Given the uncertainty of exchange rate fluctuations, we cannot estimate the affect of these fluctuations on our future business, product pricing, results of operations or financial condition.  Changes in currency exchange rates affect the relative prices at which we sell our products.  We regularly monitor our foreign currency risks and periodically take measures to reduce the risk of foreign exchange rate fluctuations on our operating results.  We do not use derivative instruments for hedging, trading or speculating on foreign exchange rate fluctuations.

 

The following table sets forth average currency exchange rates of one U.S. dollar into local currency for each of the countries in which sales revenue exceeded $10.0 million during any of the previous two years.

 

Six Months Ended June 30

 

2003

 

2002

 

Mexico

 

10.6

 

9.3

 

South Korea

 

1,203.4

 

1,287.0

 

Venezuela

 

1,636.7

 

925.9

 

 

Interest Rate Risk

 

We have investments, which by nature are subject to market risk.  At June 30, 2003, we had investments totaling $10.5 million of which $5.3 million were held as municipal obligations, carry an average fixed interest rate of 5.2 percent and mature over a five-year period. A hypothetical one percent change in interest rates would not have a material affect on our liquidity, financial position, or results of operations. Our remaining investments of $5.2 million are not subject to interest rate risk.

 

The Company’s line of credit carries a variable interest rate, and has a balance of $10.0 million at June 30, 2003. The Company does not hedge against changes in interest rates.  An increase in the effective interest rate of 1.0 percent would increase interest expense by $10,000 for every $1.0 million that the Company had outstanding on its line of credit for a full year.

 

Item 4.           CONTROLS AND PROCEDURES

 

(a)  Evaluation of disclosure controls and procedures.  Our Chief Executive Officer and our Chief Financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as at June 30, 2003 (the “Evaluation Date”), have concluded that, as of the Evaluation Date, our disclosure controls and procedures were adequate and effective to ensure that material information relating to us and our consolidated subsidiaries would be made known to them by others within those entities.

 

(b)  Changes in internal controls.  There were no significant changes in our internal controls or in other factors that could significantly affect our internal controls and procedures subsequent to the Evaluation Date, nor were there any significant deficiencies or material weaknesses in such internal controls and procedures requiring corrective actions.  As a result, no corrective actions were taken.

 

 

23



 

PART II  OTHER INFORMATION

 

Item 5.           SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

 

At the Company’s Annual Meeting of Shareholders held on May 23, 2003, the shareholders re-elected the following persons to three-year terms to the Board of Directors:

 

NOMINEE

 

FOR

 

WITHHOLD
AUTHORITY

 

 

 

 

 

 

 

Pauline Hughes Francis

 

11,867,265

 

880,479

 

Douglas Faggioli

 

12,487,939

 

259,805

 

 

Richard G. Hinckley, Eugene L. Hughes, Kristine F. Hughes, and Daniel P. Howells also serve as directors of the Company, and their terms of office continued after the Annual Meeting.

 

Item 6.           EXHIBITS AND REPORTS ON FORM 8-K

 

a)                Exhibits

31.1                           Certification of Chief Executive Officer

31.2                           Certification of Chief Financial Officer

32.1                           Certification of Chief Executive Officer

32.2                           Certification of Chief Financial Officer

 

b)                   Reports on Form 8-K

A report was filed on Form 8-K during the quarter for which this Report is filed.  The Form 8-K was dated April 21, 2003, and at Item 7 the Registrant reported its first quarter 2003 operating results.

 

Other Items

 

There were no other items to be reported under Part II of this Report.

 

24



 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

NATURE’S SUNSHINE PRODUCTS, INC.

 

 

Date:  August 13, 2003

/s/ Daniel P. Howells

 

Daniel P. Howells, President & Chief Executive Officer

 

 

Date: August 13, 2003

/s/ Craig D. Huff

 

Craig D. Huff, Executive Vice President, Chief Financial Officer & Treasurer

 

 

25