UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2015

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: 001-34483

NATURE’S SUNSHINE PRODUCTS, INC.

(Exact name of Registrant as specified in its charter)

Utah	87-0327982
(State or other jurisdiction of	(IRS Employer
incorporation or organization)	Identification No.)

2500 West Executive Parkway, Suite 100

Lehi, Utah 84043

(Address of principal executive offices and zip code)

(801) 341-7900

(Registrant’s telephone number including area code)

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

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

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

Large accelerated filer o		Accelerated filer x

Non-accelerated filer o		Smaller reporting company o
(Do not check if a smaller reporting company)

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

The number of shares of Common Stock, no par value, outstanding on July 31, 2015, was 18,691,919 shares.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain information included or incorporated herein by reference in this report may be deemed to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may include, but are not limited to, statements relating to our objectives, plans and strategies. All statements (other than statements of historical fact) that address activities, events or developments that we intend, expect, project, believe or anticipate will or may occur in the future are forward-looking statements. These statements are often characterized by terminology such as “believe,” “hope,” “may,” “anticipate,” “should,” “intend,” “plan,” “will,” “expect,” “estimate,” “project,” “positioned,” “strategy” and similar expressions, and are based on assumptions and assessments made by management in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe to be appropriate. For example, information appearing under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” includes forward-looking statements. Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties. Important factors that could cause actual results, developments and business decisions to differ materially from forward-looking statements are more fully described in this report, including the risks set forth under “Risk Factors” in Item 1A, but include the following:

· any negative consequences resulting from the economy, including the availability of liquidity to us, our independent Distributors and our suppliers or the willingness of our customers to purchase products;

· our relationship with, and our ability to influence the actions of, our independent Distributors, and other third parties with whom we do business;

· improper activity by our employees or independent Distributors;

· negative publicity related to our products, ingredients, and the nutritional supplement industry or direct selling organization;

· changing consumer preferences and demands;

· our reliance upon, or the loss or departure of any member of, our senior management team which could negatively impact our Distributor relations and operating results;

· increased state and federal regulatory scrutiny of the dietary supplement industry;

· the competitive nature of our business and the nutritional supplement industry;

· regulatory matters governing our products, ingredients, the nutritional supplement industry, our direct selling program, or the direct selling market in which we operate;

· legal challenges to our direct selling program or to the classification of our independent Distributors;

· risks associated with operating internationally and the effect of economic factors, including foreign exchange, inflation, disruptions or conflicts with our third party importers, governmental sanctions, ongoing Ukraine and Russia political conflict, pricing and currency devaluation risks, especially in countries such as Ukraine, Russia and Belarus;

· uncertainties relating to the application of transfer pricing, duties, value-added taxes, and other tax regulations, and changes thereto;

· our dependence on increased penetration of existing markets;

· our reliance on our information technology infrastructure;

· the sufficiency of trademarks and other intellectual property rights;

· changes in tax laws, treaties or regulations, or their interpretation;

· taxation relating to our independent Distributors;

· product liability claims;

· share price volatility related to, among other things, speculative trading; and

· the full implementation of our joint venture for operations in China with Fosun Industrial Co., Ltd., as well as the legal complexities, unique regulatory environment and challenges of doing business in China generally.

All forward-looking statements speak only as of the date of this report and are expressly qualified in their entirety by the cautionary statements included in or incorporated by reference into this report. Except as is required by law, we expressly disclaim any obligation to publicly release any revisions to forward-looking statements to reflect events after the date of this report. Throughout this report, we refer to Nature’s Sunshine Products, Inc., together with its subsidiaries, as “we,” “us,” “our Company” or “the Company.”

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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, 2015			December 31, 2014
Assets
Current assets:
Cash and cash equivalents	$	46,217		$	58,699
Accounts receivable, net of allowance for doubtful accounts of $768 and $849, respectively	6,946			6,732
Investments available for sale	1,781			2,546
Inventories	40,537			40,438
Deferred income tax assets	5,020			4,950
Prepaid expenses and other	11,850			7,884
Total current assets	112,351			121,249

Property, plant and equipment, net	62,249			51,343
Investment securities - trading	1,131			1,038
Intangible assets, net	630			704
Deferred income tax assets	14,722			14,495
Other assets	7,705			7,970
	$	198,788		$	196,799

Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	5,912		$	5,237
Accrued volume incentives	16,433			16,867
Accrued liabilities	26,669			28,957
Deferred revenue	3,990			4,717
Income taxes payable	1,039			2,131
Total current liabilities	54,043			57,909

Liability related to unrecognized tax benefits	7,058			6,598
Deferred compensation payable	1,131			1,038
Other liabilities	2,350			2,297
Total liabilities	64,582			67,842

Commitments and contingencies

Shareholders’ equity:
Common stock, no par value, 50,000 shares authorized, 18,783 and 18,662 shares issued and outstanding as of June 30, 2015, and December 31, 2014, respectively	126,979			125,489
Retained earnings	15,379			10,891
Noncontrolling interests	3,463			3,781
Accumulated other comprehensive loss	(11,615		)	(11,204		)
Total shareholders’ equity	134,206			128,957
	$	198,788		$	196,799

See accompanying notes to condensed consolidated financial statements.

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NATURE’S SUNSHINE PRODUCTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except per share information)

(Unaudited)

	Three Months Ended June 30,
	2015			2014

Net sales revenue	$	81,247		$	92,831
Cost of sales	(21,068		)	(22,793		)
Gross profit	60,179			70,038

Operating expenses:
Volume incentives	29,603			34,270
Selling, general and administrative	27,392			29,941
Operating income	3,184			5,827
Other income (loss), net	(2		)	(79		)
Income from continuing operations before provision for income taxes	3,182			5,748
Provision for income taxes	787			2,198
Net income from continuing operations	2,395			3,550
Loss from discontinued operations	—			(316		)
Net income	2,395			3,234
Net loss attributable to non-controlling interests	(166		)	—
Net income attributable to common shareholders	$	2,561		$	3,234

Basic and diluted net income per common share

Basic:
Net income from continuing operations	$	0.13		$	0.22
Loss from discontinued operations	$	—		$	(0.02	)
Net income attributable to common shareholders	$	0.14		$	0.20

Diluted:
Net income from continuing operations	$	0.12		$	0.22
Loss from discontinued operations	$	—		$	(0.02	)
Net income attributable to common shareholders	$	0.13		$	0.20

Weighted average basic common shares outstanding	18,720			16,187
Weighted average diluted common shares outstanding	19,244			16,224

Dividends declared per common share	$	0.10		$	0.10

See accompanying notes to condensed consolidated financial statements.

NATURE’S SUNSHINE PRODUCTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in thousands)

(Unaudited)

	Three Months Ended June 30,
	2015			2014

Net income	$	2,395		$	3,234
Foreign currency translation gain (loss) (net of tax)	(125		)	793
Reclassification of net realized gains on marketable securities in net income (net of tax)	(294		)	—
Net unrealized gains on investment securities (net of tax)	7			8
Total comprehensive income	$	1,983		$	4,035

See accompanying notes to condensed consolidated financial statements.

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NATURE’S SUNSHINE PRODUCTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except per share information)

(Unaudited)

	Six Months Ended June 30,
	2015			2014

Net sales revenue	$	165,125		$	186,298
Cost of sales	(42,949		)	(45,374		)
Gross profit	122,176			140,924

Operating expenses:
Volume incentives	59,940			69,163
Selling, general and administrative	53,722			59,093
Operating income	8,514			12,668
Other income (loss), net	(320		)	(341		)
Income from continuing operations before provision for income taxes	8,194			12,327
Provision (benefit) for income taxes	1,596			(1,459		)
Net income from continuing operations	6,598			13,786
Income (loss) from discontinued operations	1,312			(887		)
Net income	7,910			12,899
Net loss attributable to non-controlling interests	(318		)	—
Net income attributable to common shareholders	$	8,228		$	12,899

Basic and diluted net income per common share

Basic:
Net income from continuing operations	$	0.35		$	0.85
Income (loss) from discontinued operations	$	0.07		$	(0.05	)
Net income attributable to common shareholders	$	0.44		$	0.80

Diluted:
Net income from continuing operations	$	0.34		$	0.84
Income (loss) from discontinued operations	$	0.07		$	(0.05	)
Net income attributable to common shareholders	$	0.43		$	0.79

Weighted average basic common shares outstanding	18,671			16,183
Weighted average diluted common shares outstanding	19,157			16,392

Dividends declared per common share	$	0.20		$	0.20

See accompanying notes to condensed consolidated financial statements.

NATURE’S SUNSHINE PRODUCTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in thousands)

(Unaudited)

	Six Months Ended June 30,
	2015			2014

Net income	$	7,910		$	12,899
Foreign currency translation gain (loss) (net of tax)	(146		)	971
Reclassification of net realized gains on marketable securities in net income (net of tax)	(294		)	—
Net unrealized gains on investment securities (net of tax)	29			11
Total comprehensive income	$	7,499		$	13,881

See accompanying notes to condensed consolidated financial statements.

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NATURE’S SUNSHINE PRODUCTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

(Amounts in thousands)

(Unaudited)

	Common Stock					Retained			Noncontrolling			Accumulated Other Comprehensive
	Shares		Value			Earnings			Interests			Income (Loss)			Total
Balance at January 1, 2015	18,662		$	125,489		$	10,891		$	3,781		$	(11,204	)	$	128,957
Share-based compensation expense	—		2,085			—			—			—			2,085
Proceeds from the exercise of stock options, and issuance of restricted stock units	396		3,476			—			—			—			3,476
Tax benefit deficiency from share-based compensation	—		(288		)	—			—			—			(288		)
Repurchase of common stock	(275	)	(3,783		)	—			—			—			(3,783		)
Cash dividends (0.10 per share)	—		—			(3,740		)	—			—			(3,740		)
Net income	—		—			8,228			(318		)	—			7,910
Other comprehensive income	—		—			—			—			(411		)	(411		)
Balance at June 30, 2015	18,783		$	126,979		$	15,379		$	3,463		$	(11,615	)	$	134,206

See accompanying notes to condensed consolidated financial statements.

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NATURE’S SUNSHINE PRODUCTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)

	Six Months Ended June 30,
	2015			2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	7,910		$	12,899
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for doubtful accounts	33			110
Depreciation and amortization	2,152			2,375
Share-based compensation expense	2,085			2,082
(Gain) loss on sale of property and equipment	(1,251		)	19
Deferred income taxes	(46		)	(3,887		)
Amortization of bond discount	—			1
Purchase of trading investment securities	(156		)	(98		)
Proceeds from sale of trading investment securities	82			93
Realized and unrealized gains on investments	(493		)	(44		)
Foreign exchange losses	764			1,390
Changes in assets and liabilities:
Accounts receivable	(271		)	1,165
Inventories	(659		)	1,384
Prepaid expenses and other current assets	(4,057		)	(2,331		)
Other assets	16			(1,467		)
Accounts payable	1,124			410
Accrued volume incentives	(146		)	19
Accrued liabilities	(2,102		)	(5,568		)
Deferred revenue	(727		)	(428		)
Income taxes payable	(1,452		)	(858		)
Liability related to unrecognized tax benefits	230			821
Deferred compensation payable	93			51
Net cash provided by operating activities	3,129			8,138
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment	(13,071		)	(11,568		)
Proceeds from sale of property, plant and equipment	1,373			3
Purchase of investments available for sale	—			(18		)
Proceeds from the sale of investments available for sale	810			51
Net cash used in investing activities	(10,888		)	(11,532		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of cash dividends	(3,740		)	(3,237		)
Principal payments of long-term debt and revolving credit facility	—			(1,695		)
Proceeds from the exercise of stock options	3,476			210
Repurchase of common stock	(3,783		)	—
Net cash used in financing activities	(4,047		)	(4,722		)
Effect of exchange rates on cash and cash equivalents	(676		)	(576		)
Net decrease in cash and cash equivalents	(12,482		)	(8,692		)
Cash and cash equivalents at the beginning of the period	58,699			77,247
Cash and cash equivalents at the end of the period	$	46,217		$	68,555
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes	$	6,185		$	4,062
Cash paid for interest	59			106

See accompanying notes to condensed consolidated financial statements.

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NATURE’S SUNSHINE PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except per share information)

(Unaudited)

(1) Basis of Presentation

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

The Company markets its products in Australia, Austria, Belarus, Canada, Colombia, Costa Rica, the Czech Republic, Denmark, the Dominican Republic, Ecuador, El Salvador, Finland, Germany, Guatemala, Honduras, Hong Kong, Iceland, Indonesia, Ireland, Italy, Japan, Kazakhstan, Latvia, Lithuania, Malaysia, Mexico, Moldova, Mongolia, the Netherlands, New Zealand, Nicaragua, Norway, Panama, the Philippines, Poland, Russia, Singapore, Slovenia, South Korea, Spain, Sweden, Taiwan, Thailand, Ukraine, the United Kingdom, and the United States. The Company also exports its products to Argentina, Australia, Chile, Israel, New Zealand, Norway, Peru and the United Kingdom. The Company discontinued operations in Vietnam, which were approximately 0.2 percent and 0.4 percent of consolidated net sales during the six month periods ended June 30, 2015 and 2014, respectively.

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany accounts and transactions are eliminated in consolidation. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of normal recurring accruals), considered necessary for a fair presentation of the Company’s financial information as of June 30, 2015, and for the three- and six-month periods ended June 30, 2015 and 2014. The results of operations of any interim period are not necessarily indicative of the results of operations to be expected for the fiscal year ending December 31, 2015.

It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

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

Since June 30, 2012, Belarus has been designated as a highly inflationary economy. The U.S. dollar is the Company’s functional currency for this market. As a result, there were no resulting gains or losses from a re-measurement of the financial statements using official rates of the Company’s Belarusian subsidiary. However, as a result of the weakening of the Belarusian ruble, the purchasing power of the Company’s independent Distributors in this market has diminished. During the three months ended June 30, 2015 and 2014, the Company’s Belarusian subsidiary’s net sales revenue represented approximately 1.7 percent and 2.4 percent of consolidated net sales revenue, respectively. During the six months ended June 30, 2015 and 2014, the Company’s Belarusian subsidiary’s net sales revenue represented approximately 1.9 percent and 2.5 percent of consolidated net sales revenue, respectively.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09 Revenue from Contracts with Customers (Topic 606). This update requires an entity to recognize revenue to depict the transfer of promised goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. As such, this update affects an entity that either enters into contracts with customers or transfers goods and services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards. This update will supersede the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance, and creates a Topic 606. In July 2015, the FASB approved a proposal that extended the required implementation date one year to the interim and annual periods beginning after December 15, 2017, but would also permit companies to adopt the standard at the original effective date, which was the interim and annual periods beginning after December 15, 2016. The

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adoption of this ASU is not expected to have a material impact on the Company’s consolidated financial statements and footnote disclosures.

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements — Going Concern (Subtopic 205-40). The purpose of this ASU is to incorporate into U.S. GAAP management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern within one year after the date that the financial statements are issued, and to provide related footnote disclosures. This update is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The adoption of this guidance is not expected to have a material impact on the Company’s results of operations, consolidated financial statements and footnote disclosures.

In January 2015, the FASB issued ASU No. 2015-01, Income Statement - Extraordinary and Unusual Items (Subtopic 225-20): “Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items,” which eliminates the concept of an extraordinary item from GAAP. As a result, an entity will no longer be required to segregate extraordinary items from the results of ordinary operations, to separately present an extraordinary item on its income statement, net of tax, after income from continuing operations or to disclose income taxes and earnings-per-share data applicable to an extraordinary item. However, this ASU will still retain the presentation and disclosure guidance for items that are unusual in nature and occur infrequently. This ASU is effective for annual periods ending after December 15, 2015, and interim periods thereafter. A reporting entity also may apply the amendments retrospectively to all prior periods presented in the financial statements. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The adoption of this ASU is not expected to have a material impact on the Company’s results of operations, consolidated financial statements and footnote disclosures.

In February 2015, the FASB issued ASU No. 2015-02, Consolidations (Topic 810): “Amendments to the Consolidation Analysis.” This update makes amendments to the current consolidation guidance, including introducing a separate consolidation analysis specific to limited partnerships and other similar entities. Under this analysis, limited partnerships and other similar entities will be considered a variable interest entity unless the limited partners hold substantive kick-out rights or participating rights. This update is effective for interim and annual periods beginning after December 15, 2015. The Company is currently evaluating both methods of adoption, as well as the effect this ASU will have on the Company’s results of operations, consolidated financial statements and footnote disclosures.

(2) Discontinued operations

In November 2014, the Company ceased its operations in Venezuela due to the difficulties and uncertainties related to import controls, difficulties associated with repatriating cash and high inflation. This market was part of the Company’s NSP Americas segment and all of the income (loss) from discontinued operations is related to the common shareholders of the Company.

The following table summarizes the operating results of the Company’s discontinued operations for the six months ended:

	June 30,		June 30,
	2015		2014
Net sales revenue	$	—	$	3,780

Income (loss) before income tax provision	$	1,312	$	(834	)
Income tax provision	—		53
Income (loss) from discontinued operations	$	1,312	$	(887	)

During the six months ended June 30, 2015, the Company received $1,312 in net proceeds from the sales of its fixed assets in Venezuela, which is included in the results from discontinued operations. The income (loss) from discontinued operations did not have a material impact on the Company’s operating cash flows during the six months ended June 30, 2014.

(3) Restructuring Related Expenses

In April 2015, the Company announced its plan to streamline its operations and refocus its activities on profitable growth opportunities. The planned streamlining is expected to reduce costs, improve efficiencies and renew focus on larger and more profitable Company markets. As part of the plan, the Company ceased operations in Vietnam and eliminated approximately 100 positions worldwide through both severance and attrition. The Company incurred approximately $2,100 of non-recurring expenses during the quarter, which are recorded primarily in selling, general and administrative expenses, of which $1,960 was related to severance and termination benefits and $140 was related to other exit costs. All but $1,120 of the costs incurred during the three months ended June 30, 2015 have been paid. The Company expects to incur up to an additional $500 of non-recurring expenses in the subsequent quarters.

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(4) Inventories

The composition of inventories is as follows:

	June 30,		December 31,
	2015		2014
Raw materials	$	12,466	$	11,206
Work in progress	928		534
Finished goods	27,143		28,698
Total inventory	$	40,537	$	40,438

(5) Intangible Assets

At June 30, 2015, and December 31, 2014, intangibles for product formulations had a gross carrying amount of $1,763 and $1,763, accumulated amortization of $1,133 and $1,059, and a net amount of $630 and $704, respectively. The estimated useful lives of the product formulations range from 9 to 15 years.

Amortization expense for intangible assets for the three months ended June 30, 2015 and 2014, was $37 and $37, respectively. Amortization expense for intangible assets for the six months ended June 30, 2015, and 2014, was $74 and $74, respectively.

(6) Investments

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

As of June 30, 2015	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. government securities funds	$	1,791	$	—	$	(10	)	$	1,781
Total short-term investment securities	$	1,791	$	—	$	(10	)	$	1,781

As of December 31, 2014	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Municipal obligations	$	100	$	1	$	—		$	101
U.S. government securities funds	1,791		—		(15		)	1,776
Equity securities	227		454		(12		)	669
Total short-term investment securities	$	2,118	$	455	$	(27	)	$	2,546

During the six-month period ended June 30, 2015, and 2014, the proceeds from the sales of available-for-sale securities were $810 and $51, respectively. During the six-month period ended June 30, 2015, the Company had gross realized gains of $294 on sales of available-for-sale securities (net of tax). There were no gross realized gains (losses) on sales of available-for-sale securities (net of tax) for the six-month period ended June 30, 2014.

The Company’s trading securities portfolio totaled $1,131 at June 30, 2015, and $1,038 at December 31, 2014, and generated gains of $21 and $44 for the six months ended June 30, 2015, and 2014.

As of June 30, 2015, and December 31, 2014, the Company had unrealized losses of $10 and $15, respectively, in its U.S. government securities funds.

(7) Long-Term Debt and Revolving Credit Facility

The Company’s revolving credit agreement with Wells Fargo Bank, N.A., permits the Company to borrow up to $25,000 through September 1, 2016, bearing interest at LIBOR plus 1.25 percent (1.50 percent as of June 30, 2015, and December 31, 2014). The Company must pay an annual commitment fee of 0.25 percent on the unused portion of the commitment. Currently, the revolving credit agreement matures on September 1, 2016. The Company did not have any outstanding balance under the revolving credit agreement at June 30, 2015, and December 31, 2014, respectively.

The revolving credit agreement contains restrictions on liquidity, leverage, minimum net income and consecutive quarterly net losses. In addition, the agreement restricts capital expenditures, lease expenditures, other indebtedness, liens on assets, guaranties, loans and advances, and the merger, consolidation and the transfer of assets except in the ordinary course of business. The Company remains in compliance with these debt covenants as of June 30, 2015.

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(8) Net Income Per Share

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

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, 2015 and 2014:

	Three Months Ended June 30,					Six Months Ended June 30,
	2015		2014			2015		2014
Net income:
Net income from continued operations	$	2,395	$	3,550		$	6,598	$	13,786
Income (loss) from discontinued operations	$	—	$	(316	)	$	1,312	$	(887	)
Net income attributable to common shareholders	$	2,561	$	3,234		$	8,228	$	12,899

Basic weighted average shares outstanding	18,720		16,187			18,671		16,183

Basic net income per common share:
Net income from continued operations	$	0.13	$	0.22		$	0.35	$	0.85
Income (loss) from discontinued operations	$	—	$	(0.02	)	$	0.07	$	(0.05	)
Net income attributable to common shareholders	$	0.14	$	0.20		$	0.44	$	0.80

Diluted shares outstanding:
Basic weighted average shares outstanding	18,720		16,187			18,671		16,183
Stock options and restricted stock units	524		37			486		209
Diluted weighted average shares outstanding	19,244		16,224			19,157		16,392

Diluted net income per common share:
Net income from continued operations	$	0.12	$	0.22		$	0.34	$	0.84
Income (loss) from discontinued operations	$	—	$	(0.02	)	$	0.07	$	(0.05	)
Net income attributable to common shareholders	$	0.13	$	0.20		$	0.43	$	0.79

Potentially dilutive shares excluded from diluted per share amounts	348		133			348		133

Potentially anti-dilutive shares excluded from diluted per share amounts	691		653			641		468

Potentially dilutive shares excluded from diluted-per-share amounts include performance-based options to purchase shares of common stock for which certain earnings metrics have not been achieved. Potentially anti-dilutive shares excluded from diluted-per-share amounts include both non-qualified stock options and unearned performance-based options to purchase shares of common stock with exercise prices greater than the weighted-average share price during the period and shares that would be anti-dilutive to the computation of diluted net income per share for each of the periods presented.

(9) Capital Transactions

Dividends

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

On February 25, 2015, the Company announced a cash dividend of $0.10 per common share in an aggregate amount of $1,865 that was paid on March 23, 2015, to shareholders of record on March 12, 2015. On May 7, 2015, the Company announced a cash dividend of $0.10 per common share in an aggregate amount of $1,875 that was paid on June 2, 2015, to shareholders of record on May 22, 2015.

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Share Repurchase Program

In December 2014, the Company completed share repurchases under its previously announced $10 million share repurchase program. In November 2014, the Board of Directors authorized a $20 million share repurchase program beginning January 1, 2015. Such purchases may be made in the open market, through block trades, in privately negotiated transactions or otherwise. The timing and amount of any shares repurchased will be determined based on the Company’s evaluation of market conditions and other factors and the program may be discontinued or suspended at any time. At June 30, 2015, the remaining balance available for repurchases under the program was $16,217.

The following is a summary of the Company’s repurchases of common shares during the six months ended June 30, 2015:

Period	Number of Shares	Average Price Paid per Share		Program Balance Used for Repurchases
January 1 — June 30, 2015	275	$	13.77	$	3,783

To enhance the Company’s ability to repurchase shares, the Company established a trading plan pursuant to Rule 10b5-1 under the Securities Exchange Act of 1934 (the “Exchange Act”). A plan under Rule 10b5-1 allows the Company to repurchase its shares at times when it otherwise might be prevented from doing so in compliance with insider trading laws or because of a self-imposed trading blackout period. Repurchases are subject to Securities and Exchange Commission (“SEC”) regulations as well as certain price, market volume and timing constraints specified in the trading plan.

Share-Based Compensation

During the year ended December 31, 2012, the Company’s shareholders adopted and approved the Nature’s Sunshine Products, Inc. 2012 Stock Incentive Plan (the “2012 Incentive Plan”). The 2012 Incentive Plan provides for the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalent rights, performance awards, stock awards and other stock-based awards. The Compensation Committee of the Board of Directors has authority and discretion to determine the type of award as well as the amount, terms and conditions of each award under the 2012 Incentive Plan, subject to the limitations of the 2012 Incentive Plan. A total of 1,500 shares of the Company’s common stock were originally authorized for the granting of awards under the 2012 Incentive Plan. During the period ended June 30, 2015, the Company’s shareholders approved an amendment to the 2012 Incentive Plan, to increase the number of shares of Common Stock reserved for issuance by 1,500 shares. The number of shares available for awards, as well as the terms of outstanding awards, are subject to adjustment as provided in the 2012 Incentive Plan for stock splits, stock dividends, recapitalizations and other similar events.

The Company also maintains a stock incentive plan, which was approved by shareholders in 2009 (the “2009 Incentive Plan”). The 2009 Incentive Plan also provided for the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalent rights, performance awards, stock awards and other stock-based awards. Under the 2012 Incentive Plan, any shares subject to award, or awards forfeited or reacquired by the Company issued under the 2009 Incentive Plan are available for award up to a maximum of 400 shares.

Stock Options

The Company’s outstanding stock options include time-based stock options, which vest over differing periods ranging from the date of issuance up to 48 months from the option grant date; performance-based stock options, which have already vested upon achieving operating income margins of six, eight and ten percent as reported in four of five consecutive quarters over the term of the options; performance-based stock options, which vest upon achieving cumulative annual net sales revenue growth targets over a rolling two-year period, subject to the Company maintaining at least an eight percent operating income margin during the applicable period; and performance-based stock options, which vest upon achieving annual net sales targets over a rolling one-year period.

Stock option activity for the six-month period ended June 30, 2015, is as follows:

	Number of Shares		Weighted Average Exercise Price Per Share
Options outstanding at December 31, 2014	2,037		$	11.69
Granted	310		14.27
Forfeited or cancelled	(183	)	14.71
Exercised	(373	)	9.58
Options outstanding at June 30, 2015	1,791		12.27

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During the six-month period ended June 30, 2015, the Company issued time-based stock options to purchase 310 shares of common stock under the 2012 Stock Incentive Plan to the Company’s Board of Directors and executive officers. These options were issued with a weighted-average exercise price of $14.27 per share and a weighted-average grant date fair value of $4.92 per share. All of the options issued have an option termination date of ten years from the option grant date.

The fair value of each option grant was estimated on the date of the grant using the Black-Scholes option-pricing model with the following weighted average assumptions for the six-month period ended June 30, 2015:

		2015
Expected life (in years)		5.0 to 6.0
Risk-free interest rate		1.5
Expected volatility		46.3 to 52.3
Dividend yield		2.8

Expected option lives and volatilities are based on historical data of the Company. The risk-free interest rate is calculated as the average U.S. Treasury bill rate that corresponds with the option life. The dividend yield is based on the Company’s historical and expected amount of dividend payouts, at the time of grant. On August 29, 2013, and September 19, 2014, the Company paid special non-recurring cash dividends of $1.50 per common share. The Company has excluded these special non-recurring cash dividends from the dividend yield used in the Black-Scholes option-pricing model calculations as it is not representative of future dividends to be declared by the Company.

Share-based compensation expense from time-based stock options for the three-month periods ended June 30, 2015, and 2014, was approximately $160 and $719, respectively; the related tax benefit was approximately $63 and $284, respectively. Share-based compensation expense from time-based stock options for the six-month periods ended June 30, 2015, and 2014, was approximately $740 and $1,616, respectively; the related tax benefit was approximately $292 and $638, respectively. As of June 30, 2015, and December 31, 2014, the unrecognized share-based compensation expense related to the grants described above was $1,875 and $2,018, respectively. As of June 30, 2015, the remaining compensation cost is expected to be recognized over the weighted-average period of approximately 1.7 years.

The Company has not recognized any share-based compensation expense related to the net sales revenue performance-based stock options for the six-month periods ended June 30, 2015 and 2014. Should the Company attain all of the net sales revenue metrics related to the net sales revenue performance-based stock option grants, the Company would recognize up to $757 of potential share-based compensation expense.

At June 30, 2015, the aggregate intrinsic value of outstanding stock options to purchase 1,791 shares of common stock, exercisable stock options to purchase 993 shares of common stock and stock options to purchase 655 shares of common stock that are expected to vest was $3,238, $2,669 and $541, respectively. At December 31, 2014, the aggregate intrinsic value of outstanding options to purchase 2,037 shares of common stock, the exercisable options to purchase 1,069 shares of common stock, and options to purchase 794 shares of common stock expected to vest was $6,801, $4,928 and $1,779, respectively.

Restricted Stock Units

The Company’s outstanding restricted stock units (RSUs) include time-based RSUs, which vest over differing periods ranging from 12 months up to 48 months from the RSU grant date; performance-based RSUs, which vest upon achieving both cumulative annual net sales growth targets over a rolling one-year period and RSUs which vest upon achieving operating income and earnings per share targets over a rolling one-year period. RSUs given to the Board of Directors contain a restriction period in which the shares are not issued until two years after vesting. At June 30, 2015, and December 31, 2014, there were 43 and 32 vested RSUs given to the Board of Directors outstanding that had a remaining restriction period.

Restricted stock unit activity for the period ended June 30, 2015 is as follows:

	Number of Shares		Weighted Average Grant Date Fair Value
Units outstanding at December 31, 2014	180		$	15.09
Granted	593		12.76
Issued	(30	)	13.63
Forfeited or cancelled	(75	)	12.89
Units outstanding at June 30, 2015	668		12.59

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During the six-month period ended June 30, 2015, the Company granted 593 restricted stock units (RSUs) of common stock under the 2012 Incentive Plan to the Company’s board, executive officers and other employees, which are composed of both time-based RSUs and net sales and operating income and earnings per share performance-based RSUs. The time-based RSUs were issued with a weighted-average grant date fair value of $13.28 per share and vest in annual installments over a three year period from the grant date. The net sales and operating income and earnings per share performance-based RSUs were issued with a weighted-average grant date fair value of $12.13 per share and vest upon achieving both (i) net sales and operating income targets over a three year period from the grant date and (ii) earnings per share targets over a six year period from the grant date.

RSUs are valued at the market value on the date of grant, which is the grant date share price discounted for expected dividend payments during the vesting period. For RSUs with post-vesting restrictions, a Finnerty Model was utilized to calculate a valuation discount from the market value of common shares reflecting the restriction embedded in the RSUs preventing the sale of the underlying shares over a certain period of time. The Finnerty Model proposes to estimate a discount for lack of marketability such as transfer restrictions by using an option pricing theory. This model has gained recognition through its ability to address the magnitude of the discount by considering the volatility of a company’s stock price and the length of restriction. The concept underpinning the Finnerty Model is that restricted stock cannot be sold over a certain period of time. Using assumptions previously determined for the application of the option pricing model at the valuation date, the Finnerty Model discount for lack of marketability is approximately 17.5 percent for a common share.

Share-based compensation expense from RSUs for the six-month periods ended June 30, 2015, and 2014, was approximately $583 and $269, respectively; the related tax benefit was approximately $230 and $106, respectively. Share-based compensation expense from RSUs for the six-month periods ended June 30, 2015, and 2014, was approximately $1,339 and $466, respectively; the related tax benefit was approximately $529 and $184, respectively. As of June 30, 2015, and December 31, 2014, the unrecognized share-based compensation expense related to the grants described above was $3,109 and $849, respectively. As of June 30, 2015, the remaining compensation expense is expected to be recognized over the weighted average period of approximately 1.9 years.

The Company has not recognized any share-based compensation expense related to the net sales revenue and EPS performance-based RSUs for the six-month periods ended June 30, 2015 and 2014. Should the Company attain all of the net sales revenue metrics related to the net sales revenue performance-based stock option grants, the Company would recognize up to $3,600 of potential share-based compensation expense.

The number of shares issued upon vesting or exercise for restricted stock units granted, pursuant to our share-based compensation plans, is net of shares withheld to cover the minimum statutory withholding requirements that the Company pays on behalf of its employees, which was eight shares for the six-month period ended June 30, 2015. Although shares withheld are not issued, they are treated as common share repurchases for accounting purposes, as they reduce the number of shares that would have been issued upon vesting. These shares do not count against the authorized capacity under the repurchase program described above.

Stock Appreciation Rights

The Company’s outstanding stock appreciation rights (SARs) are time-based SARs, which vest over differing periods ranging from 12 months up to 48 months from the SAR grant date. The SARs have a strike price equal to the fair market value of one share of common stock on the grant date. Subsequent to vesting, the employee has the option to exercise the SAR and will receive the intrinsic value of the SAR as income on the exercise date. SARs do not entitle a participant to receive or purchase shares and are settled in cash. SARs will not reduce the number of shares of common stock available for issuance under the Company’s Stock Incentive Plans.

Stock appreciation right activity for the period ended June 30, 2015 is as follows:

	Number of Shares		Weighted Average Grant Date Fair Value
Units outstanding at December 31, 2014	30		$	5.47
Granted	—		—
Forfeited or cancelled	(10	)	5.86
Exercised	—		—
Units outstanding at June 30, 2015	20		5.27

Expected SAR lives and volatilities are based on historical data of the Company. The risk-free interest rate is calculated as the average U.S. Treasury bill rate that corresponds with the option life. The dividend yield is based on the Company’s historical and expected amount of dividend payouts, at the time of grant. On August 29, 2013, and September 19, 2014, the Company paid special non-recurring cash dividends of $1.50 per common share. The Company has excluded these special non-recurring cash dividends from the dividend yield used in the Black-Scholes SAR-pricing model calculations as it is not representative of future dividends to be declared by the Company.

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Share-based compensation expense from SARs for the three-month period ended June 30, 2015, was approximately $3; and the related tax benefit was approximately $2. Share-based compensation expense from SARs for the six-month period ended June 30, 2015, was approximately $6 and the related tax benefit was approximately $3. As of June 30, 2015, and December 31, 2014, the unrecognized share-based compensation expense related to the grants described above was $67 and $150, respectively. As of June 30, 2015, the remaining compensation expense is expected to be recognized over the weighted average period of approximately 2.1 years.

(10) Segment Information

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

The Company has two business segments that operate under the Nature’s Sunshine® Products brand and are divided based on the characteristics of their Distributor base, similarities in compensation plans, as well as the internal organization of NSP’s officers and their responsibilities (NSP Americas and NSP Russia, Central and Eastern Europe). The Company’s third business segment operates under the Synergy® WorldWide brand, which distributes its products through different selling and Distributor compensation plans and has products with formulations that are sufficiently different from those of NSP Americas and NSP Russia, Central and Eastern Europe to warrant accounting for these operations as a separate business segment. The Company’s fourth business segment, China and New Markets is deploying a multi-brand, multi-channel go-to-market strategy that offers select Nature’s Sunshine branded products through retail locations across China as well as ecommerce, and select Synergy branded products through a direct selling model. The time to market will be dependent upon regulatory processes including product registration and permit approvals. The China and New Markets segment also includes the Company’s export sales business, in which the Company sells its products to various locally managed entities independent of the Company that have distribution rights for the relevant market. All of the net sales revenue to date in the China and New Markets segment is through the Company’s export business to foreign markets outside of China set forth above that were previously part of NSP Americas. Net sales revenues for each segment have been reduced by intercompany sales as they are not included in the measure of segment profit or loss reviewed by the chief executive officer. The Company evaluates performance based on contribution margin (loss) by segment before consideration of certain inter-segment transfers and expenses.

In the fourth quarter of 2014, the Company created the China and New Markets segment. The Company moved the reporting of its export business, in which the Company sells our products to a locally managed entity independent of the Company that has distribution rights for the market, from the NSP Americas segment to the China and New Markets segment during the year ended December 31, 2014, as well as the results of its NSP Peru & United Kingdom markets, which were converted to export markets during the prior year.

Reportable business segment information is as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
Net sales revenue:
NSP Americas	$	45,050		$	46,308		$	91,560		$	92,674
NSP Russia, Central and Eastern Europe	6,815			12,838			14,258			27,875
Synergy WorldWide	28,480			32,487			57,248			62,530
China and New Markets	902			1,198			2,059			3,219
Total net sales revenue	81,247			92,831			165,125			186,298

Contribution margin (1):
NSP Americas	19,027			18,779			38,547			37,851
NSP Russia, Central and Eastern Europe	2,314			4,563			4,910			9,959
Synergy WorldWide	8,820			11,831			17,868			22,485
China and New Markets	415			595			911			1,466
Total contribution margin	30,576			35,768			62,236			71,761

Selling, general and administrative	27,392			29,941			53,722			59,093
Total operating income	3,184			5,827			8,514			12,668

Other income (expense), net	(2		)	(79		)	(320		)	(341		)
Income before provision for income taxes	$	3,182		$	5,748		$	8,194		$	12,327

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(1) Contribution margin consists of net sales revenue less cost of sales and volume incentives expense.

From an individual country perspective, only the United States and South Korea comprise 10 percent or more of consolidated net sales revenue for the three and six-month periods ended June 30, 2015 and 2014, as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Net sales revenue:
United States	$	37,054	$	37,932	$	75,576	$	75,547
South Korea	12,070		14,336		24,150		26,707
Other	32,123		40,563		65,399		84,044
	$	81,247	$	92,831	$	165,125	$	186,298

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
NSP Americas:
General health	$	19,456	$	20,453	$	39,488	$	39,819
Immune	5,038		5,083		11,255		11,042
Cardiovascular	3,543		3,215		6,644		6,569
Digestive	13,263		13,677		26,628		27,370
Personal care	870		1,035		1,840		2,056
Weight management	2,880		2,845		5,705		5,818
	45,050		46,308		91,560		92,674
NSP Russia, Central and Eastern Europe:
General health	$	2,799	$	4,831	$	5,678	$	10,376
Immune	763		1,500		1,676		3,468
Cardiovascular	446		789		899		1,727
Digestive	1,852		3,451		3,822		7,398
Personal care	627		1,468		1,509		3,336
Weight management	328		799		674		1,570
	6,815		12,838		14,258		27,875
Synergy WorldWide:
General health	$	10,799	$	11,689	$	20,936	$	22,442
Immune	251		256		484		467
Cardiovascular	8,719		11,652		17,600		22,096
Digestive	4,328		4,953		8,922		9,970
Personal care	1,448		1,734		3,060		3,470
Weight management	2,935		2,203		6,246		4,085
	28,480		32,487		57,248		62,530
China and New Markets
General health	$	426	$	551	$	957	$	1,351
Immune	103		156		261		438
Cardiovascular	73		55		154		191
Digestive	225		351		515		901
Personal care	19		23		46		54
Weight management	56		62		126		284
	902		1,198		2,059		3,219
	$	81,247	$	92,831	$	165,125	$	186,298

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

	June 30, 2015		December 31, 2014
Property, plant and equipment:
United States	$	59,505	$	48,013
Other	2,744		3,330
Total property, plant and equipment	$	62,249	$	51,343

(11) Income Taxes

For the three months ended June 30, 2015 and 2014, the Company’s provision for income taxes, as a percentage of income before income taxes, was 24.7 percent and 38.2 percent, respectively, compared with a U.S. federal statutory rate of 35.0 percent. For the six months ended June 30, 2015 and 2014, the Company’s provision (benefit) for income taxes, as a percentage of income before income taxes was 19.5 percent and (11.8) percent, respectively, compared with a U.S. federal statutory rate of 35.0 percent.

The difference between the effective tax rate and the U.S. federal statutory tax rate for the three and six months ended June 30, 2015, was primarily attributed to adjustments to the valuation allowances on U.S. foreign tax credits and on U.S. capital loss carryforwards, offset by the impact of current year losses that will not provide tax benefit.

The difference between the effective tax rate and the U.S. federal statutory tax rate for the three months ended June 30, 2014, was primarily attributed to state taxes and an increase in tax liabilities associated with uncertain tax positions, offset by a favorable domestic manufacturing deduction and net favorable foreign items related to tax rate differences and adjustments to foreign valuation allowances.

The difference between the effective tax rate and the U.S. federal statutory tax rate for the six months ended June 30, 2014, was primarily attributed to foreign tax credits arising from intercompany dividends of $21,500 paid by foreign subsidiaries to the U.S. corporation. This discrete item resulted in an income tax benefit of $6,720 for the six months ended June 30, 2014.

Changes to the effective rate due to dividends received from foreign subsidiaries and the impact of foreign tax credits are expected to be recurring. Depending on various factors, changes from the foregoing items may be favorable or unfavorable in a particular period.

The Company’s U.S. federal income tax returns for 2009 through 2013 are open to examination for federal tax purposes. The Company has several foreign tax jurisdictions that have open tax years from 2008 through 2014.

As of June 30, 2015, the Company had accrued $7,058 related to unrecognized tax positions compared with $6,598 as of December 31, 2014. This net increase was primarily attributed to increases in transfer pricing contingencies.

Interim income taxes are based on an estimated annualized effective tax rate applied to the respective quarterly periods, adjusted for discrete tax items in the period in which they occur. Although the Company believes its tax estimates are reasonable, the Company can make no assurance that the final tax outcome of these matters will not be different from that which it has reflected in its historical income tax provisions and accruals. Such differences could have a material impact on the Company’s income tax provision and operating results in the period in which the Company makes such determination.

(12) Commitments and Contingencies

Legal Proceedings

The Company is party to various legal proceedings. Management cannot predict the ultimate outcome of these proceedings, individually or in the aggregate, or their resulting effect on the Company’s business, financial position, results of operations or cash flows as litigation and related matters are subject to inherent uncertainties, and unfavorable rulings could occur. Were an unfavorable outcome to occur, there exists the possibility of a material adverse impact on the business, financial position, results of operations, or cash flows for the period in which the ruling occurs and/or future periods. The Company maintains product liability, general liability and excess liability insurance coverage. However, no assurances can be given that such insurance will continue to be available at an acceptable cost to the Company, that such coverage will be sufficient to cover one or more large claims, or that the insurers will not successfully disclaim coverage as to a pending or future claim.

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Non-Income Tax Contingencies

The Company has reserved for certain state sales and use tax and foreign non-income tax contingencies based on the likelihood of an obligation in accordance with accounting guidance for probable loss contingencies. Loss contingency provisions are recorded for probable losses at management’s best estimate of a loss, or when a best estimate cannot be made, a minimum loss contingency amount is recorded. The Company provides provisions for potential payments of tax to various tax authorities for contingencies related to non-income tax matters, including value-added taxes and sales tax. The Company provides provisions for U.S. state sales taxes in each of the states where the Company has nexus. As of June 30, 2015, and December 31, 2014, accrued liabilities include $2,009 and $2,760, respectively, related to non-income tax contingencies. While management believes that the assumptions and estimates used to determine this liability are reasonable, the ultimate outcome of those matters cannot presently be determined. The Company is not able at this time to predict the ultimate outcomes of those matters or to estimate the effect of the ultimate outcomes, if greater than the amounts accrued, would have on the financial condition, results of operations or cash flows of the Company.

Other Litigation

The Company is party to various other legal proceedings in several foreign jurisdictions related to value-added tax assessments and other civil litigation. While there is a reasonable possibility that a loss may be incurred, either the losses are not considered to be probable or the Company cannot at this time estimate the loss, if any; therefore, no provision for losses has been provided. The Company believes future payments related to these matters could range from $0 to approximately $500.

(13) Fair Value Measurements

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

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

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

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

The following table presents the Company’s hierarchy for its assets, measured at fair value on a recurring basis, as of June 30, 2015:

	Level 1		Level 2		Level 3
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Total
Investments available-for-sale
U.S. government security funds	$	1,781	$	—	$	—	$	1,781
Trading investment securities	1,131		—		—		1,131
Total assets measured at fair value on a recurring basis	$	2,912	$	—	$	—	$	2,912

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The following table presents the Company’s hierarchy for its assets, measured at fair value on a recurring basis, as of December 31, 2014:

	Level 1		Level 2		Level 3
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Total
Investments available-for-sale
Municipal obligations	$	—	$	101	$	—	$	101
U.S. government security funds	1,776		—		—		1,776
Equity securities	669		—		—		669
Trading investment securities	1,038		—		—		1,038
Total assets measured at fair value on a recurring basis	$	3,483	$	101	$	—	$	3,584

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

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

For the six months ended June 30, 2015, and for the year ended December 31, 2014, there were no fair value measurements using the significant unobservable inputs (Level 3).

The carrying amounts reflected on the consolidated balance sheet for cash and cash equivalents, accounts receivable, accounts payable and the revolving credit facility payable approximate fair value due to their short-term nature. During the six months ended June 30, 2015 and 2014, the Company did not have any re-measurements of non-financial assets at fair value on a nonrecurring basis subsequent to their initial recognition.

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

The following Management’s Discussion and Analysis should be read in conjunction with the unaudited consolidated financial statements and notes thereto included in this report, as well as the consolidated financial statements, the notes thereto, and management’s discussion and analysis included in our Annual Report on Form 10-K for the year ended December 31, 2014, and our Reports on Form 8-K filed since the date of such Form 10-K. Certain information contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are “forward-looking statements”. These statements are based on management’s expectations and assumptions and are subject to risks and uncertainties that may cause actual results to differ materially from those expressed. Our actual results, performance or achievements may differ materially from the results discussed in this Item 2 because of various factors, including those set forth elsewhere herein. See “Cautionary Note Regarding Forward-Looking Statements”.

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

OVERVIEW

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

The Company has four business segments that are divided based on the different characteristics of their Distributor bases, selling and Distributor compensation plans and product formulations, as well as the internal organization of our officers and their responsibilities and business operations. Two business segments operate under the Nature’s Sunshine Products brand (NSP Americas and NSP Russia, Central and Eastern Europe), and one operates under the Synergy WorldWide brand. The Company’s fourth business segment, China and New Markets, is deploying a multi-brand, multi-channel go-to-market strategy that offers select Nature’s Sunshine branded products through retail locations across China as well as ecommerce, and select Synergy branded products through a direct selling model. The time to market will be dependent upon regulatory processes including product registration and permit approvals. The China and New Markets segment also includes the Company’s export sales business, in which the Company sells its products to various locally managed entities independent of the Company that have distribution rights for the relevant market. All of the net sales revenue to date in the China and New Markets segment is through the Company’s export business to foreign markets outside of China detailed below. The export business was previously part of NSP Americas.

We market our products in Australia, Austria, Belarus, Canada, Colombia, Costa Rica, the Czech Republic, Denmark, the Dominican Republic, Ecuador, El Salvador, Finland, Germany, Guatemala, Honduras, Hong Kong, Iceland, Indonesia, Ireland, Italy, Japan, Kazakhstan, Latvia, Lithuania, Malaysia, Mexico, Moldova, Mongolia, the Netherlands, New Zealand, Nicaragua, Norway, Panama, the Philippines, Poland, Russia, Singapore, Slovenia, South Korea, Spain, Sweden, Taiwan, Thailand, Ukraine, the United Kingdom, and the United States. We export our products to Argentina, Australia, Chile, Israel, New Zealand, Norway, Peru and the United Kingdom. The Company discontinued operations in Vietnam, which were approximately 0.2 percent and 0.4 percent of consolidated net sales during the six month periods ended June 30, 2015 and 2014, respectively.

In the second quarter of 2015, we experienced a decrease in our consolidated net sales of 12.5 percent (or 7.7 percent in local currencies) compared to the same period in 2014. NSP Russia, Central and Eastern Europe net sales decreased approximately 46.9 percent compared to the same period in 2014. Synergy WorldWide net sales decreased approximately 12.3 percent compared to the same period in 2014 (or 2.4 percent in local currencies). NSP Americas net sales decreased approximately 2.7 percent compared to the same period in 2014 (or 0.3 percent in local currencies). China and New Markets net sales decreased approximately 24.7 percent compared to the same period in 2014. The markets that experienced net sales growth in local currencies were primarily from our Synergy Europe, Synergy Indonesia and Synergy Japan markets in our Synergy WorldWide segment and NSP North America in our NSP Americas segment during the second quarter of 2015. Excluding the NSP Russia, Central and Eastern Europe segment, net sales would have decreased by approximately 7.0% percent (or 1.5 percent in local currencies). In addition to the declines in NSP Russia, Central and Eastern Europe, the strengthening of the U.S. dollar versus the currencies of our European, Latin American and Asian markets (beginning late last year) has resulted in an approximate 4.8 percent or $4.5 million reduction of our net sales this quarter.

The Company expects that sales in NSP Russia, Central and Eastern Europe will continue to be affected by political unrest in Ukraine and Russia, sanctions against Russia and the significant impact of currency devaluation. We do not expect this decline in net sales to reverse in the near term as currency devaluations have continued into 2015. We remain strongly supportive and engaged with our independent Distributors in the region, and are supporting their activity with additional promotions and training. However, at this

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time, the Company expects that sales in its NSP Russia, Central and Eastern Europe segment will be significantly affected by the political unrest in Ukraine and Russia, sanctions in Russia and the impact of currency devaluation. We are continuing to evaluate various options to keep our distributor base engaged. Nevertheless, our strong partnership with our local partner in the region should provide a solid foundation to reignite growth once the situation stabilizes.

Over the same period, selling, general and administrative costs as a percentage of net sales revenue for 2015, increased to 33.7 percent from 32.3 percent in 2014 as a result of the decrease in net sales from our NSP Russia, Central & Eastern Europe, the impact of foreign currency devaluation versus the U.S. dollar in our other markets, and previously announced restructuring charges of approximately $2.1 million taken during the quarter as part of a plan to streamline operations as discussed below. In absolute terms, selling, general and administrative expenses decreased $2.5 million.

We distribute our products to consumers through an independent sales force comprised of Managers and Distributors, some of whom also consume our products. Typically a person who joins our independent sales force begins as a Distributor. A Distributor may earn Manager status by committing more time and effort to selling our products, recruiting productive independent Distributors and attaining certain product sales levels. On a worldwide basis, active Managers were approximately 13,400 and 15,200, and active Distributors and customers were approximately 262,300 and 300,900, at June 30, 2015 and 2014, respectively, primarily due to declines in our NSP Russia, Central and Eastern Europe segment as a result of the conditions noted above, as well as the conversion of the NSP Peru and United Kingdom markets to export markets.

Net sales revenue represents net sales including shipping and handling revenues offset by volume rebates given to independent Managers, Distributors and customers. Volume rebates as a percentage of retail sales may vary by country depending upon regulatory restrictions that limit or otherwise restrict rebates. We also offer reduced volume rebates with respect to certain products and promotions worldwide.

Our gross profit consists of net sales less cost of sales, which represents our manufacturing costs, the price we pay to our raw material suppliers and manufacturers of our products, and duties and tariffs, as well as shipping and handling costs related to product shipments and distribution to our independent Managers, Distributors and customers.

Volume incentives are a significant part of our direct sales marketing program, and represent commission payments made to our independent Managers and Distributors. These payments are designed to provide incentives for reaching higher sales levels and for recruiting additional independent Distributors. Volume incentives vary slightly, on a percentage basis, by product due to our pricing policies and commission plans in place in our various operations.

Selling, general and administrative expenses represent our operating expenses, components of which include labor and benefits, sales events, professional fees, travel and entertainment, Distributor marketing, occupancy costs, communication costs, bank fees, depreciation and amortization, and other miscellaneous operating expenses.

In April 2015, the Company announced its plan to streamline its operations and refocus its activities on profitable growth opportunities. The planned streamlining is expected to reduce costs, improve efficiencies and renew focus on larger and more profitable Company markets. As part of the plan, the Company ceased operations in Vietnam and eliminated approximately 100 positions worldwide through both severance and attrition. The Company incurred $2.1 million of non-recurring expenses during the quarter and expects to incur up to an additional $0.5 million of non-recurring expenses in the subsequent quarters. As a result of this action, the Company expects to realize annualized savings of approximately $10 million to $15 million from lower operating and employment costs. Net sales in Vietnam were approximately 0.2 and 0.4 percent of consolidated net sales for the six months ended June 30, 2015 and 2014, respectively.

Most of our sales to independent Distributors outside the United States are made in the respective local currencies. In preparing our financial statements, we translate revenues into U.S. dollars using average exchange rates. Additionally, the majority of our purchases from our suppliers generally are made in U.S. dollars. Consequently, a strengthening of the U.S. dollar versus a foreign currency can have a negative impact on our reported sales and contribution margins and can generate transaction losses on intercompany transactions.

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RESULTS OF OPERATIONS

The following table summarizes our unaudited consolidated operating results from continuing operations in U.S. dollars and as a percentage of net sales revenue for the three months ended June 30, 2015 and 2014 (dollar amounts in thousands).

	Three Months Ended					Three Months Ended
	June 30, 2015					June 30, 2014					Change
	Total			Percent of		Total			Percent of		Total
	dollars			net sales		dollars			net sales		dollars			Percentage
Net sales revenue	$	81,247		100.0	%	$	92,831		100.0	%	$	(11,584	)	(12.5	)%
Cost of sales	(21,068		)	(25.9	)	(22,793		)	(24.6	)	1,725			(7.6	)
	60,179			74.1		70,038			75.4		(9,859		)	(14.1	)

Volume incentives	29,603			36.4		34,270			36.9		(4,667		)	(13.6	)
SG&A expenses	27,392			33.7		29,941			32.3		(2,549		)	(8.5	)
Operating income	3,184			3.9		5,827			6.3		(2,643		)	(45.4	)
Other income (loss), net	(2		)	(0.0	)	(79		)	(0.1	)	77			(97.5	)
Income from continuing operations before income taxes	3,182			3.9		5,748			6.2		(2,566		)	(44.6	)
Provision for income taxes	787			1.0		2,198			2.4		(1,411		)	(64.2	)
Net income from continuing operations	$	2,395		2.9	%	$	3,550		3.8	%	$	(1,155	)	(32.5	)%

The following table summarizes our unaudited consolidated operating results from continuing operations in U.S. dollars and as a percentage of net sales revenue for the six months ended June 30, 2015 and 2014 (dollar amounts in thousands).

	Six Months Ended					Six Months Ended
	June 30, 2015					June 30, 2014					Change
	Total			Percent of		Total			Percent of		Total
	dollars			net sales		dollars			net sales		dollars			Percentage
Net sales revenue	$	165,125		100.0	%	$	186,298		100.0	%	$	(21,173	)	(11.4	)%
Cost of sales	(42,949		)	(26.0	)	(45,374		)	(24.4	)	(2,425		)	(5.3	)
	122,176			74.0		140,924			75.6		(18,748		)	(13.3	)

Volume incentives	59,940			36.3		69,163			37.1		(9,223		)	(13.3	)
SG&A expenses	53,722			32.5		59,093			31.7		(5,371		)	(9.1	)
Operating income	8,514			5.2		12,668			6.8		(4,154		)	(32.8	)
Other income (loss), net	(320		)	(0.2	)	(341		)	(0.2	)	21			(6.2	)
Income from continuing operations before income taxes	8,194			5.0		12,327			6.6		(4,133		)	(33.5	)
Provision (benefit) for income taxes	1,596			1.0		(1,459		)	(0.8	)	3,055			(209.4	)
Net income from continuing operations	$	6,598		4.0	%	$	13,786		7.4	%	$	(7,188	)	(52.1	)%

Net Sales Revenue

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

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with U.S. GAAP. Throughout the last five years, foreign currency exchange rates have fluctuated significantly. See Item 3. Quantitative and Qualitative Disclosures about Market Risk.

The following table summarizes the changes in our net sales revenue by operating segment with a reconciliation to net sales revenue excluding the impact of currency fluctuations for the three months ended June 30, 2015 and 2014 (dollar amounts in thousands);

	Net Sales Revenue by Operating Segment
	Three Months Ended June 30, 2015		Three Months Ended June 30, 2014		Percent Change		Impact of Currency Exchange			Percent Change Excluding Impact of Currency

NSP Americas:
NSP North America	$	36,816	$	36,829	(0.0	)%	$	(359	)	0.9	%
NSP Latin America	8,234		9,479		(13.1	)	(771		)	(5.0	)
	45,050		46,308		(2.7	)	(1,130		)	(0.3	)

NSP Russia, Central and Eastern Europe	6,815		12,838		(46.9	)	(123		)	(46.0	)

Synergy WorldWide:
Synergy Asia Pacific	18,765		20,581		(8.8	)	(1,626		)	(0.9	)
Synergy Europe	6,669		7,766		(14.1	)	(1,603		)	6.5
Synergy North America	3,046		4,140		(26.4	)	—			(26.4	)
	28,480		32,487		(12.3	)	(3,229		)	(2.4	)

China and New Markets	902		1,198		(24.7	)	—			(24.7	)

	$	81,247	$	92,831	(12.5	)%	$	(4,482	)	(7.7	)%

The following table summarizes the changes in our net sales revenue by operating segment with a reconciliation to net sales revenue excluding the impact of currency fluctuations for the six months ended June 30, 2015 and 2014 (dollar amounts in thousands);

Net Sales Revenue by Operating Segment

Six Months
Ended June
30, 2015

Six Months
Ended June
30, 2014

Percent
Change

Impact of
Currency
Exchange

Percent
Change
Excluding
Impact of
Currency

NSP Americas:

NSP North America

74,990

73,743

1.7

Part I. Financial Information		4

Item 1.	Financial Statements (Unaudited)	4

	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Operations	5
	Condensed Consolidated Statements of Comprehensive Income	5
	Condensed Consolidated Statement of Changes in Stockholders’ Equity	7
	Condensed Consolidated Statements of Cash Flows	8
	Notes to Condensed Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	38

Item 4.	Controls and Procedures	41

Part II. Other Information		42

Item 1.	Legal Proceedings	42

Item 1A.	Risk Factors	42

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42

Item 3.	Defaults Upon Senior Securities	42

Item 4.	Mine Safety Disclosures	42

Item 5.	Other Information	42

Item 6.	Exhibits	43