Nature's Sunshine(US:NATR)2024-05-07 21:11Part I. Financial Information Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for Q1 2024, including balance sheets, income, comprehensive income, equity, and cash flow statements with notes Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $77,773 | $82,373 | | Total current assets | $160,156 | $165,817 | | Total assets | $247,267 | $249,773 | | Liabilities & Equity | | | | Total current liabilities | $68,881 | $76,753 | | Total liabilities | $87,560 | $90,233 | | Total shareholders' equity | $159,707 | $159,540 | Condensed Consolidated Statements of Income (Unaudited) | Account | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | | :--- | :--- | :--- | | Net sales | $110,993 | $108,634 | | Gross profit | $78,978 | $76,942 | | Operating income | $4,624 | $172 | | Net income attributable to common shareholders | $2,321 | $860 | | Diluted earnings per share | $0.12 | $0.04 | Condensed Consolidated Statements of Cash Flows Highlights (Unaudited) | Cash Flow Activity | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $2,190 | $9,325 | | Net cash used in investing activities | ($3,689) | ($2,325) | | Net cash provided by (used in) financing activities | $107 | ($1,156) | | Net decrease in cash and cash equivalents | ($4,600) | $5,688 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2024 financial results, noting a 2.2% increase in net sales to $111.0 million and a significant rise in operating income to $4.6 million, while addressing ongoing geopolitical and inflationary challenges - Consolidated net sales increased 2.2% (3.8% in local currencies) in Q1 2024 compared to Q1 202388 - Operating income surged to $4.6 million from $172,000 in the prior-year period, driven by lower SG&A expenses93 - The conflict in Eastern Europe continues to impact the business, though net sales in the region were stable at $14.7 million for the quarter8485 - Global inflationary pressures continue to affect costs for raw materials, labor, production, and transportation87 Results of Operations Q1 2024 net sales increased to $111.0 million, driven by growth in North America and Europe, with improved gross profit margin and reduced SG&A expenses due to a prior-year non-recurring loss Consolidated Operating Results (in thousands) | | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Change % | | :--- | :--- | :--- | :--- | | Net sales | $110,993 | $108,634 | 2.2% | | Gross profit | $78,978 | $76,942 | 2.6% | | Operating income | $4,624 | $172 | 2,588.4% | | Net income | $2,490 | $1,253 | 98.7% | Net Sales by Operating Segment (in thousands) | Segment | Q1 2024 Net Sales | Q1 2023 Net Sales | % Change | % Change (Local Currency) | | :--- | :--- | :--- | :--- | :--- | | Asia | $46,220 | $46,345 | (0.3)% | 5.2% | | Europe | $22,296 | $21,405 | 4.2% | 1.9% | | North America | $36,525 | $34,648 | 5.4% | 5.4% | | Latin America and Other | $5,952 | $6,236 | (4.6)% | (8.0)% | - SG&A expenses decreased by $2.9 million, driven primarily by a non-recurring loss in Japan in the prior year, partially offset by investments in digital growth108 - The effective tax rate for Q1 2024 was 46.5%, a significant increase from 25.7% in Q1 2023, primarily due to the tax treatment of foreign operations and foreign losses that do not provide a future tax benefit606163 Liquidity and Capital Resources As of March 31, 2024, the company maintains strong liquidity with $91.3 million in working capital and $77.8 million in cash, despite a decrease in operating cash flow and share repurchases - Working capital was $91.3 million at March 31, 2024, up from $89.1 million at year-end 2023. Cash and cash equivalents totaled $77.8 million121 Net Consolidated Cash Flows (in thousands) | Activity | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Operating activities | $2,190 | $9,325 | | Investing activities | ($3,689) | ($2,325) | | Financing activities | $107 | ($1,156) | - During Q1 2024, the company repurchased 105,000 shares of common stock for $1.8 million. The remaining authorization under the share repurchase program is $15.8 million125 Critical Accounting Policies and Estimates Management identifies critical accounting policies requiring significant estimates, including revenue recognition, inventory valuation, incentive trip accruals, contingencies, and income taxes - Key critical accounting policies and estimates include Revenue Recognition, Inventories (valued at lower of cost and net realizable value), Incentive Trip Accrual, Contingencies, and Income Taxes131132133134135 Quantitative and Qualitative Disclosures about Market Risk The company is exposed to market risks from foreign currency and interest rate fluctuations, along with social, political, and economic conditions in its international operations, with no material changes from prior disclosures - The company's financial results are affected by fluctuations in currency exchange rates, interest rates, and other uncertainties inherent in its international business139 Controls and Procedures Management concluded disclosure controls were effective as of March 31, 2024, successfully remediating a material weakness related to a fraudulent wire transfer scheme at its Japanese subsidiary through enhanced approvals and centralized cash management - Based on an evaluation, the CEO and CFO concluded that the company's disclosure controls and procedures were effective as of March 31, 2024141 - The material weakness related to fraudulent wire transfers at Synergy Japan, identified in February 2023, has been remediated as of March 31, 2024143145 - Remediation efforts included enhancing wire transfer approval design, improving controls within online banking platforms, and increasing centralization of cash management review147 Part II. Other Information Legal Proceedings The company reported no legal proceedings during the quarter - None149 Risk Factors No material changes to the company's risk factors were reported since the 2023 Annual Report on Form 10-K filing - There have been no material changes to the company's risk factors since the filing of the 2023 Annual Report on Form 10-K150 Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities This section details the company's Q1 2024 share repurchase activity, including 105,000 shares bought for approximately $1.8 million Issuer Purchases of Equity Securities (Q1 2024) | Period | Total Shares Purchased (in thousands) | Average Price Paid Per Share | Maximum Dollar Value Remaining (in thousands) | | :--- | :--- | :--- | :--- | | Jan 2024 | 15 | $17.22 | | | Feb 2024 | 55 | $17.70 | | | Mar 2024 | 35 | $17.63 | | | Total | 105 | | $15,759 | Other Information No directors or executive officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter ended March 23, 2024 - No directors or executive officers adopted, modified, or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter154 Exhibits This section lists exhibits filed with the 10-Q report, including certifications from the CEO, CFO, and Chief Accounting Officer, along with Inline XBRL financial data files - The filing includes certifications from the CEO, CFO, and Chief Accounting Officer (Exhibits 31.1, 31.2, 31.3, 32.1, 32.2, 32.3) and Inline XBRL documents (Exhibit 101 series)155