SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended March 31, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________________to __________________ Commission File #0-8707 NATURE'S SUNSHINE PRODUCTS, INC. -------------------------------- (Exact Name of Registrant) Utah 87-0327982 ------------------------ --------------------------------------- (State of Incorporation) (I.R.S. Employer Identification Number) 75 East 1700 South Provo, Utah 84606 (Address of Principal Executive Offices) (801) 342-4300 (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 such shorter period that the Registrant was required to file such report(s)), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- The number of shares of common stock, without par value, outstanding as of May 3, 1999, was 17,740,599. PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS NATURE'S SUNSHINE PRODUCTS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Amounts In Thousands)
March 31, 1999 December 31, (UNAUDITED) 1998 --------- ------------ ASSETS CURRENT ASSETS: Cash and cash equivalents $ 30,641 $ 22,099 Accounts receivable, net 10,068 9,939 Inventories 21,076 22,494 Deferred income tax assets 2,369 2,438 Prepaid expenses and other 5,612 6,025 --------- --------- Total Current Assets 69,766 62,995 PROPERTY, PLANT AND EQUIPMENT, net 25,491 25,896 LONG-TERM INVESTMENTS 12,171 11,675 OTHER ASSETS 2,840 3,133 --------- --------- $ 110,268 $ 103,699 --------- --------- --------- ---------
The accompanying notes to the financial statements are an integral part of these consolidated condensed financial statements. 2 NATURE'S SUNSHINE PRODUCTS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED) (Amounts In Thousands)
March 31, 1999 December 31, (UNAUDITED) 1998 --------- ------------ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Short-term debt $ 1,447 $ 1,728 Accounts payable 4,544 4,403 Accrued volume incentives 12,343 9,638 Accrued liabilities 10,102 8,649 Income taxes payable 5,110 3,279 --------- --------- Total Current Liabilities 33,546 27,697 --------- --------- LONG-TERM LIABILITIES: Long-term deferred income tax liabilities 2,123 2,035 Deferred compensation 524 --- --------- --------- Total Long-Term Liabilities 2,647 2,035 --------- --------- SHAREHOLDERS' EQUITY: Common stock, no par value, 20,000 shares authorized; 19,446 shares issued 37,528 37,528 Retained earnings 76,404 72,013 Treasury stock, at cost, 1,569 and 1,421 shares at March 31, 1999 and December 31, 1998, respectively (30,765) (28,926) Accumulated other comprehensive income (loss) (9,092) (6,648) --------- --------- Total Shareholders' Equity 74,075 73,967 --------- --------- $ 110,268 $ 103,699 --------- --------- --------- ---------
The accompanying notes to the financial statements are an integral part of these consolidated condensed 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 March 31, --------------------------- 1999 1998 -------- -------- SALES REVENUE $ 72,178 $ 75,283 -------- -------- COSTS AND EXPENSES: Cost of goods sold 12,857 13,542 Volume incentives 33,123 35,199 Selling, general and administrative 18,539 18,684 -------- -------- 64,519 67,425 -------- -------- OPERATING INCOME 7,659 7,858 OTHER INCOME, net: 597 329 -------- -------- INCOME BEFORE PROVISION FOR INCOME TAXES 8,256 8,187 PROVISION FOR INCOME TAXES 3,266 3,320 -------- -------- NET INCOME $ 4,990 $ 4,867 -------- -------- OTHER COMPREHENSIVE INCOME (LOSS), net of tax: Foreign currency translation adjustments (2,437) 42 Unrealized holding losses arising during the period (7) (125) -------- -------- (2,444) (83) -------- -------- COMPREHENSIVE INCOME $ 2,546 $ 4,784 -------- -------- -------- -------- BASIC NET INCOME PER COMMON SHARE $ 0.28 $ 0.26 -------- -------- WEIGHTED AVERAGE BASIC SHARES 17,976 18,587 -------- -------- -------- -------- DILUTED NET INCOME PER COMMON SHARE $ 0.28 $ 0.26 -------- -------- WEIGHTED AVERAGE DILUTED SHARES 18,101 18,950 -------- -------- -------- --------
The accompanying notes to the financial statements are an integral part of these consolidated condensed financial statements. 4 NATURE'S SUNSHINE PRODUCTS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Increase (Decrease) in Cash and Cash Equivalents (Amounts In Thousands) (UNAUDITED)
Three Months Ended March 31, --------------------------- 1999 1998 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 4,990 $ 4,867 Adjustments to reconcile net income to net cash provided by operating activities: Bad debt expense 9 1 Depreciation and amortization 1,489 1,139 Gain on sale of fixed assets (5) --- Changes in assets and liabilities: Increase in accounts receivable (138) (1,388) Decrease in inventories 1,418 410 Decrease in prepaid expenses and other assets 757 336 Increase in accounts payable 141 362 Increase in accrued volume incentives 2,705 2,685 Increase in accrued liabilities 1,977 4,164 Increase in income taxes payable 1,831 932 Increase in deferred income taxes 157 221 Cumulative translation adjustments (1,777) 207 -------- -------- Net Cash Provided by Operating Activities 13,554 13,936 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (731) (2,028) (Purchase) Sale of long-term investments (496) 123 Payments received on long-term receivables 18 18 Purchase of other assets (333) (429) Proceeds from sale of assets 17 --- Advance to minority interest partner (108) (129) -------- -------- Net Cash Used in Investing Activities (1,633) (2,445) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Payment of cash dividends (599) (619) Purchase of treasury stock (1,839) (2,072) Repayments of short-term debt (280) (152) Proceeds from exercise of stock options --- 853 Tax benefit from stock option exercise --- 252 -------- -------- Net Cash Used in Financing Activities (2,718) (1,738) -------- -------- EFFECT OF EXCHANGE RATES ON CASH (661) (164) -------- -------- NET INCREASE IN CASH AND CASH EQUIVALENTS 8,542 9,589 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 22,099 27,813 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 30,641 $ 37,402 -------- -------- -------- --------
The accompanying notes to the financial statements are an integral part of these consolidated condensed financial statements. 5 NATURE'S SUNSHINE PRODUCTS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Amounts In Thousands, Except Per-Share Information) (UNAUDITED) (1) INTERIM FINANCIAL STATEMENT POLICIES AND DISCLOSURES The unaudited, condensed consolidated financial statements of Nature's Sunshine Products, Inc. and subsidiaries included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally required in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that 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 financial position as of March 31, 1999, and the results of operations 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-month period ended March 31, 1999, are not necessarily indicative of the results that may be expected for the year ending December 31, 1999. It is suggested that these consolidated condensed 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, 1998. (2) INVENTORIES Inventories consist of the following:
March 31, December 31, 1999 1998 --------- ------------ Raw materials $ 6,467 $ 6,104 Work in process 1,298 1,377 Finished goods 13,311 15,013 -------- -------- $ 21,076 $ 22,494 -------- -------- -------- --------
6 (3) NET INCOME PER SHARE Basic net income per common share (Basic EPS) excludes dilution and 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 March 31, 1999, the Company had a total of 1,119 options outstanding. The options were all granted at market prices and have a weighted average exercise price of $10.96. Following is a reconciliation of the numerator and denominator of Basic EPS to the numerator and denominator of Diluted EPS for the three months ended:
Net Income Shares Per Share (Numerator) (Denominator) Amount ----------- ------------- --------- March 31, 1999 Basic EPS $4,990 17,976 $0.28 Effect of stock options --- 125 ------ ------ ----- Diluted EPS $4,990 18,101 $0.28 ------ ------ ----- ------ ------ ----- March 31, 1998 Basic EPS $4,867 18,587 $0.26 Effect of stock options --- 363 ------ ------ ----- Diluted EPS $4,867 18,950 $0.26 ------ ------ ----- ------ ------ -----
At March 31, 1999 and 1998, there were outstanding options to purchase 151 and 11 shares of common stock, respectively, that were not included in the computation of Diluted EPS, as their effect would have been anti-dilutive. 7 (4) EQUITY TRANSACTIONS The Company has declared 43 consecutive quarterly cash dividends. The most recent quarterly cash dividend of 3 1/3 cents per common share was declared April 29, 1999, to shareholders of record on May 13, 1999 and is payable on May 27, 1999. On September 23, 1998, the Board of Directors authorized the repurchase up to 500 shares of the Company's common stock as market conditions warrant. As of March 31, 1999, the Company had repurchased approximately 370 shares of common stock under this approval. Subsequent to March 31, 1999, the Company repurchased the remaining 130 shares of common stock previously authorized by the Board of Directors. (5) RECENT ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." The Statement establishes accounting and reporting standards requiring that derivative instruments be recorded in the balance sheet as either an asset or liability measured at its fair value and that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. SFAS No. 133 is effective for fiscal years beginning after June 15, 1999. The adoption of this statement will not have a material effect on the Company's consolidated financial statements as the Company does not currently hold any derivative or hedging instruments. 8 (6) ACCUMULATED OTHER COMPREHENSIVE INCOME The composition of accumulated other comprehensive income (loss), net of tax, is as follows:
Unrealized Total Gains/(Losses) Accumulated Foreign Currency on Available-for Sale Other Comprehensive Adjustments Securities Income (Loss) ---------------- ---------------------- ------------------- Balance as of December 31, 1998 $ (7,012) $364 $ (6,648) Current period change (2,437) (7) (2,444) -------- ---- -------- Balance as of March 31, 1999 $ (9,449) $357 $ (9,092) -------- ---- -------- -------- ---- --------
During the quarter ended March 31, 1999, the Brazilian real devalued approximately 45 percent relative to the U.S. dollar. A significant portion of the foreign currency adjustment is associated with the devaluation of the Brazilian real. (7) LEGAL PROCEEDINGS The Company is a defendant in various lawsuits which are incidental to the Company's business. Management, after consultation with its legal counsel, believes that the ultimate disposition of these matters will not have a material effect upon the Company's consolidated results of operations or financial position. (8) 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 by management in deciding how to allocate resources and in assessing performance. The Company evaluates performance based on operating income (loss). The Company's operating segments are based on geographic operations and include a domestic segment (United States) and three international segments consisting of Latin America, Asia Pacific and other regions. Intersegment sales, eliminated in consolidation, are not material. Prior balances have been restated to reflect the Company's implementation of SFAS No. 131. 9 Segment information for the three months ended March 31, 1999, compared to the previous year are as follows:
Three Months Ended March 31, 1999 1998 ---- ---- Sales Revenue: Domestic $ 48,580 $ 49,496 International: Latin America 17,132 20,073 Asia Pacific 3,002 2,294 Other 3,464 3,420 -------- -------- 72,178 75,283 -------- -------- Operating Expenses: Domestic 41,791 43,453 International: Latin America 15,800 18,048 Asia Pacific 3,840 2,916 Other 3,088 3,008 -------- -------- 64,519 67,425 -------- -------- Operating Income: Domestic 6,789 6,043 International: Latin America 1,332 2,025 Asia Pacific (838) (622) Other 376 412 -------- -------- 7,659 7,858 Unallocated Amounts Other Income (Expense) 597 329 -------- -------- Income Before Provision for Income Taxes $ 8,256 $ 8,187 -------- -------- -------- --------
MARCH 31, December 31, 1999 1998 -------- ------------ Assets Domestic $ 71,631 $ 62,971 International: Latin America 30,382 32,154 Asia Pacific 5,590 6,236 Other 2,665 2,338 -------- -------- $110,268 $103,699 -------- -------- -------- --------
10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the consolidated financial statements, the notes thereto and management's discussion and analysis included in the Company's Annual Report for the year ended December 31, 1998. RESULTS OF OPERATIONS The following table identifies (i) the relationship that net income items disclosed in the consolidated condensed financial statements have to total sales, and (ii) amount and percent of change of such items compared to the corresponding prior period. (Dollar Amounts in Thousands) (UNAUDITED)
(i) Income and Expense (ii) Items as a Percent of Sales Three Months Ended March 31 - --------------------------- 1999 to 1998 Three Months Ended ---------------------------- March 31 Amount of Percent - --------------------------- Income and Increase of 1999 1998 Expense Items (Decrease) Change ---- ---- ------------- ---------- ------- 100.0% 100.0% Sales revenue $(3,105) (4.1)% ----- ----- ------- 17.8 18.0 Cost of sales (685) (5.1) 45.9 46.8 Volume incentives (2,076) (5.9) 25.7 24.8 SG&A expenses (145) (0.8) ----- ----- ------- 89.4 89.6 Total operating expenses (2,906) (4.3) ----- ----- ------- 10.6 10.4 Operating income (199) (2.5) ------- 0.8 0.5 Other income 268 81.5 ----- ----- 11.4 10.9 Income before income taxes 69 0.8 4.5 4.4 Provision for income taxes (54) (1.6) ----- ----- ------- 6.9% 6.5% Net income $ 123 2.5% ----- ----- ------- -------
11 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) SALES REVENUE Sales revenue for the three months ended March 31, 1999, was $72.2 million compared to $75.3 million in the prior year, an decrease of approximately 4 percent. Management believes the decrease in sales for the three months ended March 31, 1999, is attributable to increased product and price competition in the nutritional supplement market as well as increased competition for new distributors and the continued devaluation of foreign currencies against the U.S. dollar. Sales revenue in the Company's domestic operations was $48.6 million for the three months ended March 31, 1999, a decrease of approximately 2 percent over the same period in the prior year. The domestic sales revenue growth rate was negatively impacted during the period by increased product and price competition in the nutritional supplement market. The Company expects competition to remain strong for the foreseeable future. Management is evaluating various programs and promotions in an effort to restore current growth rates to those experienced in the past. Domestic sales revenue from the Hispanic market increased approximately 4 percent during the first quarter of 1999, as compared to the same period the prior year. These increases were the result of increased focus on and the introduction of several programs directed specifically at the Hispanic market. A price increase of approximately 2 percent, primarily driven by increased raw material costs, went into effect on April 1, 1999. Management believes this price increase will be acceptable to its sales force and will result in increased sales revenue. However, there can be no assurance that the price increase will be accepted by the sales force. The Company's international operations reported sales revenue of $23.6 million for the three months ended March 31, 1999, a decrease of 8 percent compared to the same period in 1998. The declining rate of growth of international sales revenue was primarily the result of the increased valuation of the U.S. dollar against foreign currencies. International operations which reported the most significant foreign currency impacts were Brazil, Mexico, Ecuador and Colombia. During the quarter 12 ended March 31, 1999, the Brazilian real devalued (approximately 45 percent) relative to the U.S. dollar. The Company instituted a price increase in Brazil effective March 1, 1999, to adjust for this devaluation. Management believes that the price increases will be acceptable to its sales force and will result in increased sales revenue. Eliminating the adverse effect of the foreign currency devaluation, international sales revenue would have increased approximately 3 percent. The Company also experienced a decrease in sales revenue in certain of its Latin American subsidiaries, most notably, Colombia, Brazil and Venezuela. The Company's independent sales force consists of Managers and Distributors. A Distributor interested in earning additional income by committing more time and effort to selling the Company's products may attain the rank of "Manager." Appointment as a Manager is dependent upon attaining certain purchase volume levels and demonstrating leadership abilities. The number of Managers at March 31, 1999, was 15,778 compared to 15,758 at March 31, 1998. The number of Distributors at March 31, 1999, was approximately 526,000 compared to approximately 516,000 at December 31, 1998, an increase of approximately 2 percent. COST OF GOODS SOLD For the three months ended March 31, 1999, the Company experienced a slight decrease in cost of goods sold, as a percentage of sales, compared to the same period in the prior year. Management expects cost of goods sold to remain relatively constant as a percent of sales during the remainder of 1999, as compared to the quarter ended March 31, 1999. VOLUME INCENTIVES Volume incentives are payments to independent sales force members for reaching certain levels of sales performance and organizational development and are an integral part of the Company's direct sales marketing program. Volume incentives vary slightly, on a percentage basis, by product due to the Company's pricing policies. For the three months ended March 31, 1999, the Company experienced a 13 0.9 percent decrease in volume incentives, as a percentage of sales, compared to the same period the prior year. The decrease in volume incentives is primarily the result of change in product sales mix to products that have a lower volume incentive payout. Management expects volume incentives to remain relatively constant, as a percent of sales, during the remainder of 1999, as compared to the quarter ended March 31, 1999. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses for the three months ended March 31, 1999, increased, as a percent of sales, as the result of the decrease in sales revenue. Actual SG&A expenses decreased slightly during the quarter as compared to March 31, 1998. Management expects SG&A to decrease slightly, as a percent of sales, for the year ended December 31, 1999, compared to the quarter ended March 31, 1999. SEGMENT INFORMATION See information included in the condensed consolidated financial statements under Item 1 Note 8. BALANCE SHEET ACCRUED VOLUME INCENTIVES Accrued volume incentives increased approximately $2.7 million as of March 31, 1999, as compared to December 31, 1998, as a result of increased sales revenue during the month of March as compared to the month of December. ACCRUED LIABILITIES Accrued liabilities increased approximately $1.5 million during the three months ended March 31, 1999, resulting primarily from accruals associated with the Company's sales conventions and travel programs. 14 INCOME TAXES PAYABLE Income taxes payable increased approximately $1.8 million during the three months ended March 31, 1999. The increase is associated with the timing of required tax deposits in the United States. LIQUIDITY AND CAPITAL RESOURCES Cash and cash equivalents increased approximately $8.5 million for the three months ended March 31, 1999. The increase in cash and cash equivalents is primarily the result of net income as well as the increases in accrued liabilities. During the first three months of 1999, cash totaling $1.8 million was used to repurchase approximately 150,000 shares of common stock. Management believes the Company's stock is an attractive investment and pursuant to its previously announced 500,000 common share buyback program purchased the remaining balance of approximately 130,000 shares of its common stock subsequent to March 31, 1999. On February 23, 1999, the Company's Board of Directors authorized the expenditure of $6.0 million for revitalizing and relaunching the Company's products in Japan. The authorized funds will be used for marketing and advertising costs as well as capital improvements. The Company anticipates a majority of these expenditures to take place during the second and third quarters of 1999, and will be funded from the Company's current working capital. The expenditures could have an impact on future earnings. During the three months ended March 31, 1998, the Company paid approximately $1.5 million for the expansion of its domestic warehouse and manufacturing facilities associated with continued construction costs. The warehouse portion of the facility was completed during the second quarter of 1998. Total costs associated with the expansion were approximately $6.2 million. The entire amount was financed from working capital. Management believes that working capital requirements can be met through the Company's available cash and cash equivalents and internally-generated funds for the foreseeable future; however, a 15 prolonged economic downturn or a decrease in the demand for the Company's products could adversely affect the long-term liquidity of the Company. In the event of a significant decrease in cash provided by the Company's operations, it may be necessary for the Company to obtain external sources of funding. The Company does not currently maintain a credit facility or any other external sources of long-term funding; however, Management believes that such funding could be obtained on competitive terms in the event additional sources of funds became necessary. LEGAL PROCEEDING The Company is a defendant in various lawsuits which are incidental to the Company's business. Management, after consultation with its legal counsel, believes that the ultimate disposition of these matters will not have a material effect upon the Company's consolidated results of operations or financial position. THE YEAR 2000 ISSUE In an effort to ensure the Company's information systems as well as all other systems are Year 2000 ("Y2K") compliant, the Company is actively engaged in assessing and correcting any potential problems. During 1997, the Company formed a committee to review all systems and correct any potential problems. After initial review of all internal systems, the Company has determined that the majority are currently Y2K compliant. It is estimated by third quarter of 1999, systems which are not currently Y2K compliant will be brought into compliance. The Company has estimated that it may need to spend from $0.5 million to $1.0 million to ensure that all areas of non-compliance are corrected. Most of the systems that are not currently compliant had previously been scheduled for replacement as part of the Company's ongoing maintenance and upgrading programs. The Company anticipates that risks related to its information and non-information systems will be mitigated by current efforts being made in conjunction with ongoing testing and review of its systems. 16 However, the primary Y2K risk to the Company's operation is potential service disruption from third-party providers. These services include but are not limited to providers that supply telephone, electricity, banking, shipping and raw materials for the Company's manufacturing operations. Any disruption of these critical services would hinder the Company's ability to receive, process and ship orders. In the event of a temporary disruption in the supply of raw materials, the Company believes it currently maintains an adequate supply of finished goods and raw material inventories to sustain manufacturing and distribution of finished product until alternative sources become available. Although in the past the Company has been able to locate alternative sources, there can be no assurance the Company will be successful in locating such sources in the future. The Company also believes that a temporary disruption of communication services would seriously impact the Company's ability to receive and process orders. The Company has manual processes in place, which it believes would provide temporary replacement for such services. Efforts are currently underway to verify Y2K compliance of the Company's major service providers. Notwithstanding the foregoing, there can be no assurance that the Company will not experience operational difficulties as a result of Y2K issues, either arising out of internal operations or caused by third-party service providers, which individually or collectively could have an adverse impact on business operations and require the Company to incur unanticipated expenses to remedy any problems. The Company is currently evaluating what contingency plans, if any, may need to be made in the event the Company or third-party providers with whom the Company does business experience Y2K problems. SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS Statements included in this Management's Discussion and Analysis of Financial Condition and Results of Operations and other items 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 17 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, 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 this "Management's Discussion and Analysis of Financial Condition and Results of Operations", and elsewhere in this Form 10-Q the words "estimates", "expects", "anticipates", "forecasts", "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 Information required by this item is not presented because the Company believes that its investments in market-risk-sensitive instruments is not material. 18 PART II OTHER INFORMATION ITEM 6. Exhibits and Reports on Form 8-K a) No exhibits are required to be filed by Item 601 of Regulation S-K. b) No reports were filed on Form 8-K during the quarter for which this report is filed. OTHER ITEMS There were no other items to be reported under Part II of this report. 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: May 10, 1999 /s/ Daniel P. Howells ------------------------------ Daniel P. Howells, President & Chief Executive Officer Date: May 10, 1999 /s/ Craig D. Huff ------------------------------ Craig D. Huff, Chief Financial Officer 19