Prepared by MerrillDirect

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)

ý	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2001

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	(I.R.S. Employer
	Incorporation or Organization)	Identification No.)

	75 East 1700 South
	Provo, Utah 84606

	(Address of Principal Executive Offices, including Zip Code)

	(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 ý No o

The number of shares of common stock, no par value, outstanding as of August 6, 2001, was 16,314,920.

NATURE'S SUNSHINE PRODUCTS, INC.
FORM 10-Q

For Quarter Ended June 30, 2001

Table of Contents

Part I. Financial Information

	Item 1.	Financial Statements

		Condensed Consolidated Balance Sheets
		Condensed Consolidated Statements of 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

Part II. Other Information

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk

	Item 4.	Submission of Matters To A Vote Of Security Holders

	Item 6.	Exhibits and Reports on Form 8-K

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,			December 31,
			2001			2000

ASSETS

CURRENT ASSETS:
	Cash and cash equivalents		$		30,995	$		28,803
	Accounts receivable, net		6,733			7,326
	Inventories		27,198			26,043
	Deferred income tax assets		2,787			2,174
	Prepaid expenses and other		8,032			8,631


		Total Current Assets	75,745			72,977

PROPERTY, PLANT AND EQUIPMENT, net			32,334			25,293

LONG-TERM INVESTMENTS			11,826			10,715

INTANGIBLE AND OTHER ASSETS, net			9,234			9,462


			$	129,139		$	118,447

The accompanying notes are an integral part of these
condensed consolidated financial statements.

			June 30,				December 31,
			2001				2000

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
	Short-term debt		$	112			$		385
	Accounts payable		6,853				4,961
	Accrued volume incentives		11,400				9,807
	Accrued liabilities		14,029				12,060
	Income taxes payable		2,786				2,194


		Total Current Liabilities	35,180				29,407

LONG-TERM LIABILITIES:
	Deferred income tax liabilities		1,623				2,814
	Deferred compensation		1,594				1,342


		Total Long-Term Liabilities	3,217				4,156


SHAREHOLDERS' EQUITY:
	Common stock, no par value; 20,000 shares authorized, 19,446 shares issued		37,066				37,435
	Retained earnings		109,981				102,347
	Treasury stock, at cost, 3,165 and 3,020 shares, respectively		(44,037			)	(43,391			)
	Accumulated other comprehensive loss		(12,268			)	(11,507			)


		Total Shareholders’ Equity	90,742				84,884


			$		129,139		$	118,447

The accompanying notes are an integral part of these
condensed consolidated financial statements.

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,

		2001				2000


SALES		$		81,760		$				79,689


COSTS AND EXPENSES:
	Cost of goods sold	14,655				13,797
	Volume incentives	35,929				35,325
	Selling, general and administrative	24,395				22,869

		74,979				71,991


OPERATING INCOME		6,781				7,698

OTHER INCOME, net		695				357


INCOME BEFORE PROVISION FOR INCOME TAXES		7,476				8,055
PROVISION FOR INCOME TAXES		2,780				3,164


NET INCOME		4,696				4,891


OTHER COMPREHENSIVE INCOME (LOSS), net of tax:
	Foreign currency translation adjustments	234				(778					)
	Unrealized holding gain (loss) on marketable securities	22				(108					)
	Reclassification adjustment for gains included in net income	(13			)	(41					)

		243				(927					)


COMPREHENSIVE INCOME		$		4,939		$			3,964


BASIC NET INCOME PER COMMON SHARE		$		0.29		$		0.29


WEIGHTED AVERAGE BASIC SHARES		16,258				16,930


DILUTED NET INCOME PER COMMON SHARE		$	0.28			$	0.29


WEIGHTED AVERAGE DILUTED SHARES		16,710				16,992

The accompanying notes are an integral part of these
condensed consolidated financial statements.

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,

		2001					2000


SALES		$	163,454				$				161,115


COSTS AND EXPENSES:
	Cost of goods sold	29,268					28,162
	Volume incentives	72,212					71,892
	Selling, general and administrative	48,788					46,428

		150,268					146,482


OPERATING INCOME		13,186					14,633

OTHER INCOME, net		654					761


INCOME BEFORE PROVISION FOR INCOME TAXES		13,840					15,394

PROVISION FOR INCOME TAXES		5,122					6,007


NET INCOME		8,718					9,387


OTHER COMPREHENSIVE LOSS, net of tax:
	Foreign currency translation adjustments	(772				)	(519					)
	Unrealized holding gain (loss) on marketable securities	24					(82					)
	Reclassification adjustment for gains included in net income	(13				)	(41					)

		(761				)	(642					)


COMPREHENSIVE INCOME		$		7,957			$			8,745


BASIC NET INCOME PER COMMON SHARE		$			0.54		$		0.55


WEIGHTED AVERAGE BASIC SHARES		16,273					17,026


DILUTED NET INCOME PER COMMON SHARE		$			0.53		$	0.55


WEIGHTED AVERAGE DILUTED SHARES		16,524					17,174

The accompanying notes are an integral part of these
condensed consolidated financial statements.

NATURE’S SUNSHINE PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(Amounts In Thousands)
(Unaudited)

					Six Months Ended
					June 30,

					2001			2000

CASH FLOWS FROM OPERATING ACTIVITIES:
	Net income				$	8,718		$	9,387
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization			3,249			3,302
		Tax benefit from stock option exercise			48			—
		Loss (gain) on sale of property, plant and equipment			14			(19		)
		Deferred income taxes			(1,804		)	(513		)
		Deferred compensation			252			204
		Changes in assets and liabilities:
			Accounts receivable, net		593			(2,929		)
			Inventories		(1,155		)	(1,916		)
			Prepaid expenses and other assets		599			584
			Accounts payable		1,892			642
			Accrued volume incentives		1,593			860
			Accrued liabilities		1,969			4,046
			Income taxes payable		592			(13		)
			Cumulative currency translation adjustments		(333		)	(311		)

				Net Cash Provided by Operating Activities	16,227			13,324

CASH FLOWS FROM INVESTING ACTIVITIES:
	Capital expenditures				(9,807		)	(1,927		)
	Purchase of long-term investments, net				(1,100		)	67
	Payments received (advances) on long-term receivables				112			(296		)
	Purchase of other assets				(440		)	(1,028		)
	Proceeds from sale of property, plant and equipment				59			44

				Net Cash Used in Investing Activities	(11,176		)	(3,140		)

CASH FLOWS FROM FINANCING ACTIVITIES:
	Payment of cash dividends				(1,084		)	(1,137		)
	Purchase of treasury stock				(1,300		)	(3,072		)
	Repayments of short-term debt				(273		)	(320		)
	Proceeds from exercise of stock options				237			—

				Net Cash Used in Financing Activities	(2,420		)	(4,529		)

EFFECT OF EXCHANGE RATES ON CASH					(439		)	(208		)

NET INCREASE IN CASH AND CASH EQUIVALENTS					2,192			5,447
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD					28,803			18,433

CASH AND CASH EQUIVALENTS AT END OF THE PERIOD					$	30,995		$	23,880

The accompanying notes are an integral part of these
condensed consolidated financial statements.

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 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 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 financial position as of June 30, 2001, and the results of operations and 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, 2001, are not necessarily indicative of the results that may be expected for the year ending December 31, 2001.

The Company suggests 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, 2000.

(2) INVENTORIES

Inventories consist of the following:

	June 30,			December 31,
	2001			2000

Raw materials	$	6,966		$	6,400
Work in process	1,521			1,345
Finished goods	18,711			18,298

	$		27,198	$	26,043

(3) NET INCOME PER COMMON 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 June 30, 2001, the Company had a total of 4,356 common stock options outstanding. These options were all granted at fair market value and have a weighted-average exercise price of $8.45 per share.

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, 2001 and 2000:

		Net Income		Shares	Per Share
		(Numerator)		(Denominator)	Amount

Three Months Ended June 30, 2001

Basic EPS		$	4,696	16,258	$	0.29
	Effect of stock options	—		452

Diluted EPS		$	4,696	16,710	$	0.28

Three Months Ended June 30, 2000

Basic EPS		$	4,891	16,930	$	0.29
	Effect of stock options	—		62

Diluted EPS		$	4,891	16,992	$	0.29


Six Months Ended June 30, 2001

Basic EPS		$	8,718	16,273	$	0.54
	Effect of stock options	—		251

Diluted EPS		$	8,718	16,524	$	0.53

Six Months Ended June 30, 2000

Basic EPS		$	9,387	17,026	$	0.55
	Effect of stock options	—		148

Diluted EPS		$	9,387	17,174	$	0.55

For the three months ended June 30, 2001 and 2000, there were outstanding options to purchase 623 and 1,125 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, 2001 and 2000, there were outstanding options to purchase 866 and 926 shares of common stock, respectively, that were not included in the computation of Diluted EPS, as their effect would have been anti-dilutive.

(4) EQUITY TRANSACTIONS

The Company has declared consecutive quarterly cash dividends since 1988. The most recent quarterly cash dividend of 3 1/3 cents per common share was declared on July 25, 2001, to shareholders of record on August 6, 2001, and is payable on August 14, 2001.

On February 6, 2001, the Board of Directors authorized the repurchase of up to 1,000 shares of the Company's common stock as market conditions warrant. For the six months ended June 30, 2001, the Company repurchased approximately 20 shares of common stock under this approval.

(5) RECENT ACCOUNTING PRONOUNCEMENTS

In July 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 141, Business Combinations and SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No. 141 requires all business combinations initiated after June 30, 2001, to be accounted for using the purchase method. SFAS No. 142 provides guidance on how to account for goodwill and intangible assets after an acquisition is complete. This statement eliminates the amortization of goodwill and requires that it be assessed for impairment at each reporting date. The Company anticipates that the adoption of this pronouncement will not have a material effect on the Company's consolidated financial statements.

(6) ACCUMULATED OTHER COMPREHENSIVE LOSS

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


				Unrealized		Total
				Gains on		Accumulated
	Foreign Currency			Available-for Sale		Other Comprehensive
	Adjustments			Securities		Loss

Balance as of December 31, 2000	$	(11,710	)	$	203	$	(11,507	)
Current period change	(772		)	11		(761		)

Balance as of June 30, 2001	$	(12,482	)	$	214	$	(12,268	)

(7) SEGMENT INFORMATION

The Company has four operating segments based on geographic location. 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 assess performance. The Company evaluates performance based on operating income (loss). Intersegment sales are eliminated in consolidation and are not material.

Operating segment information is as follows:


		Three Months Ended					Six Months Ended
		June 30,					June 30,
		2001		2000			2001		2000

Sales Revenue:
	United States	$	45,635	$	44,183		$	91,679	$	93,599
	Latin America	19,142		20,537			39,006		39,321
	Asia Pacific	11,374		10,450			21,638		18,995
	Other	5,609		4,519			11,131		9,200

		81,760		79,689			163,454		161,115


Operating Expenses:
	United States	40,070		38,072			81,666		82,243
	Latin America	18,653		19,734			37,014		37,579
	Asia Pacific	10,756		9,597			21,046		17,815
	Other	5,500		4,588			10,542		8,845

		74,979		71,991			150,268		146,482


Operating Income:
	United States	5,565		6,111			10,013		11,356
	Latin America	489		803			1,992		1,742
	Asia Pacific	618		853			592		1,180
	Other	109		(69		)	589		355

		6,781		7,698			13,186		14,633

Other Income		695		357			654		761

Income Before Provision for Income Taxes		$	7,476	$	8,055		$	13,840	$	15,394

Segment assets are as follows:


		June 30,		December 31,
		2001		2000

Assets
	United States	$	75,417	$	66,232
	Latin America	31,028		29,434
	Asia Pacific	17,083		17,858
	Other	5,611		4,923

		$	129,139	$	118,447

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 on Form 10-K for the year ended December 31, 2000.

RESULTS OF OPERATIONS

The following table identifies (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)					(ii)
Income and Expense Items as a Percent of Sales					Three Months Ended June 30 2001 to 2000

Three Months Ended
June 30					Amount of			Percent
				Income and	Increase			of
2001		2000		Expense Items	(Decrease)			Change

100.0	%	100.0	%	Sales	$	2,071		2.6	%

17.9		17.3		Cost of goods sold	858			6.2
44.0		44.3		Volume incentives	604			1.7
29.8		28.7		SG&A expenses	1,526			6.7

91.7		90.3		Total operating expenses	2,988			4.2

8.3		9.7		Operating income	(917		)	(11.9	)
0.8		0.4		Other income, net	338			94.7

9.1		10.1		Income before provision for income taxes	(579		)	(7.2	)
3.4		4.0		Provision for income taxes	(384		)	(12.1	)

5.7	%	6.1	%	Net income	$	(195	)	(4.0	)%

RESULTS OF OPERATIONS (cont.)

(Dollar Amounts in Thousands)
(Unaudited)

(i)					(ii)
Income and Expense Items as a Percent of Sales					Six Months Ended June 30 2001 to 2000

Six Months Ended
June 30					Amount of			Percent
				Income and	Increase			of
2001		2000		Expense Items	(Decrease)			Change

100.0	%	100.0	%	Sales	$	2,339		1.5	%

17.9		17.5		Cost of goods sold	1,106			3.9
44.2		44.6		Volume incentives	320			0.4
29.8		28.8		SG&A expenses	2,360			5.1

91.9		90.9		Total operating expenses	3,786			2.6

8.1		9.1		Operating income	(1,447		)	(9.9	)
0.4		0.5		Other income, net	(107		)	(14.1	)

8.5		9.6		Income before provision for income taxes	(1,554		)	(10.1	)
3.2		3.8		Provision for income taxes	(885		)	(14.7	)

5.3	%	5.8	%	Net income	$	(669	)	(7.1	)%

MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

SALES

Sales for the three months ended June 30, 2001, were $81.8 million compared to $79.7 million for the same period in the prior year, an increase of approximately 2.6 percent. Sales for the six months ended June 30, 2001, were $163.5 million compared to $161.1 million for the same period in the prior year, an increase of approximately 1.5 percent. The increase in sales for the three and six months ended June 30, 2001, compared to the same periods in the prior year is attributable to sales growth throughout the Company's international operations as well as growth in the Company's United States operations for the three months ended June 30, 2001.

The Company's United States operations reported sales of $45.6 million and $91.7 million for the three and six months ended June 30, 2001, an increase of approximately 3.3 percent and a decrease of approximately 2.1 percent, respectively, over the same periods in the prior year.

The Company's international operations reported record sales of $36.1 million and $71.8 million for the three and six months ended June 30, 2001, an increase of approximately 1.7 percent and 6.3 percent, respectively, over the same periods in the prior year. International sales accounted for approximately 44.2 percent of consolidated sales for the three and six months ended June 30, 2001.

Sales in Latin America were $19.1 million and $39.0 million for the three and six months ended June 30, 2001, a decrease of approximately 6.8 percent and 0.8 percent, respectively, over the same periods in the prior year. The sales decrease experienced in Latin America was primarily due to regulations imposed by the Brazilian government to restrict the importation of nutritional supplements. Brazil reported sales revenue for the six months ended June 30, 2001, of $7.0 million compared to $11.9 million for the same period in the prior year. Long term, Brazil is expected to remain profitable, however, new regulations may continue to have a negative impact on sales revenue. The decrease in sales revenue in Brazil was offset, in part, by strong sales growth in Mexico, Venezuela and Ecuador.

Sales in Asia Pacific were $11.4 million and $21.6 million for the three and six months ended June 30, 2001, an increase of approximately 8.8 percent and 13.9 percent, respectively, over the same periods in the prior year. The sales growth experienced in the Company's Asia Pacific markets is the result of continued sales increases experienced in South Korea, as well as sales increases generated from Synergy Japan, which the Company acquired on October 31, 2000.

Sales in the Company's other markets were $5.6 million and $11.1 million for the three and six months ended June 30, 2001, an increase of approximately 24.1 percent and 21.0 percent, respectively, over the same periods in the prior year. The sales growth experienced in the Company's other markets is primarily due to the results of its operations in Russia and Israel.

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 June 30, 2001 was approximately 18,900 compared to approximately 16,100 at December 31, 2000. The number of Distributors at June 30, 2001 was approximately 581,000 compared to approximately 589,000 at December 31, 2000.

COST OF GOODS SOLD

For the three and six months ended June 30, 2001, the Company experienced a slight increase in cost of goods sold, as a percentage of sales, compared to the same periods in the prior year. The increase in cost of goods sold was primarily the result of currency devaluations in certain international markets, as well as the increase in international sales where cost of goods sold is slightly higher than in the Company's United States operations. Management expects cost of goods sold to remain relatively constant as a percent of sales during the remainder of 2001, compared to the six months ended June 30, 2001.

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 and six months ended June 30, 2001, the Company experienced a slight decrease in volume incentives, as a percentage of sales, compared to the same periods in the prior year. The decrease in volume incentives is primarily the result of increased international sales where volume incentives are lower, as a percent of sales, than in the United States. Management expects volume incentives to remain relatively constant, as a percent of sales, during the remainder of 2001 compared to the six months ended June 30, 2001.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses for the three and six months ended June 30, 2001, increased, as a percent of sales, compared to the same periods in the prior year primarily as the result of increased expenditures associated with the integration of Synergy Japan. Eliminating the expenses associated with the Synergy Japan acquisition, selling, general and administrative expenses, as a percent of sales, would have remained constant. Management expects selling, general and administrative expenses to decrease slightly, as a percent of sales, for the remainder of 2001 compared to the six months ended June 30, 2001, as the result of increased sales and the continued control of selling, general and administrative expenses..

SEGMENT INFORMATION

See information included in the condensed consolidated financial statements under Item 1 Note 7.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents increased approximately $2.2 million for the six months ended June 30, 2001, compared to December 31, 2000. The increase in cash and cash equivalents is primarily the result of increases in net income as well as in accrued volume incentives and other accrued liabilities.

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 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 operating activities, it might 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.

On March 2, 2000, the Company announced its plans to complete the manufacturing, research and development and quality assurance areas of its recent facility expansion. Construction began during the third quarter of 2000. The cost of this project is expected to be approximately $14.0 million of which $9.4 million had been paid as of June 30, 2001. Completion of this project is scheduled for the second quarter of 2002. The Company anticipates this expansion as well as other capital projects to be funded from working capital.

On May 10, 2001, the Company announced that its wholly owned subsidiary, Innovative Botanical Solutions, Inc., entered into an exclusive agreement with Cetalon Corporation to manufacture a proprietary line of Cetalon-branded herbs and vitamins. As part of this agreement, Innovative Botanical Solutions purchased $1.5 million in Cetalon common stock. Subsequent to June 30, 2001, the Company exercised an option to purchase an additional $.5 million in Cetalon common stock.

LEGAL PROCEEDINGS

The Company is a defendant in various lawsuits which are incidental to the Company’s business. Management, after consultation with 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.

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, 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.

PART II OTHER INFORMATION
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company conducts its business in several countries and intends to continue to expand its 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, the Company's 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 it has 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, 2001, approximately 44.2 percent of the Company's revenue and 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 the functional currency, and all sales and expenses are translated at average exchange rates for the reported periods. Therefore, the Company's sales and expenses will be positively impacted by a 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, the Company cannot estimate the affect of these fluctuations on the Company's future business, product pricing, results of operations or financial condition. Changes in currency exchange rates affect the relative prices at which the Company sells its products. The Company regularly monitors its foreign currency risks and periodically takes measures to reduce the impact of foreign exchange rate fluctuations on the Company's operating results. The Company does 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,	2001	2000

Brazil	2.1	1.8
Japan	120.3	106.8
Mexico	9.4	9.4
South Korea	1,288.7	1,119.8
Venezuela	707.7	668.0

INTEREST RATE RISK

The Company has investments, which by nature are subject to market risk. At June 30, 2001, the Company had investments totaling $17.6 million of which $9.7 million were equity investments and $7.9 million were municipal obligations, which carry a fixed interest rate of 5.3 percent and mature between one and five years. A hypothetical one percent change in interest rates would not have a material affect on the Company's liquidity, financial condition or results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

At the Company’s Annual Meeting of Shareholders held on May 22, 2001, the stockholders re-elected the following persons to three-year terms to the Board of Directors:

NOMINEE	FOR	WITHHOLD AUTHORITY

Richard G. Hinckley	14,343,581	319,416
Eugene L. Hughes	14,409,595	253,449

Kristine F. Hughes, Pauline T. Hughes, Daniel P. Howells and Douglas Faggioli 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) 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: August 7, 2001		/s/	Daniel P. Howells

			Daniel P. Howells, President & Chief Executive Officer

Date: August 7, 2001		/s/	Craig D. Huff

			Craig D. Huff, Chief Financial Officer