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What changed in NATURES SUNSHINE PRODUCTS INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of NATURES SUNSHINE PRODUCTS INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+170 added−180 removedSource: 10-K (2025-03-11) vs 10-K (2023-12-31)

Top changes in NATURES SUNSHINE PRODUCTS INC's 2024 10-K

170 paragraphs added · 180 removed · 146 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

31 edited+3 added−3 removed62 unchanged
Biggest changeNoted below are the goals we have set to address the environmental impacts from our operations: • 50 percent reduction of greenhouse gas emissions for Scope 1 & 2 by 2025; • Zero waste at all distribution centers by 2025; • 35 percent waste reduction at our owned manufacturing facility by 2025; To learn more about our environmental, social and governance (“ESG”) initiatives, as well as review our annual ESG report and accompanying policies, access the ESG section of our website at: https://ir.naturessunshine.com/esg.
Biggest changeWe continue to make progress on our goals set to address the environmental impacts from operations and we are optimistic that we will achieve the following by the end of 2025: • 50 percent reduction of greenhouse gas emissions for Scope 1 & 2 by 2025; and • 35 percent waste reduction at our owned manufacturing facility by 2025.
Business Segments We have four business segments (Asia, Europe, North America, and Latin America and Other) based primarily upon the geographic region where each segment operates, as well as the internal organization of our officers and their responsibilities. Each of the geographic segments operate under the Nature’s Sunshine Products and Synergy® WorldWide brands.
Business Segments We have four business segments (Asia, Europe, North America and Latin America and Other) based primarily upon the geographic region where each segment operates, as well as the internal organization of our officers and their responsibilities. The geographic segments operate under the Nature’s Sunshine Products and Synergy WorldWide brands.
Such Regulations exist at the federal, state or local levels in the United States and at all levels of government in foreign jurisdictions, including Regulations pertaining to: (1) the formulation, manufacturing, packaging, labeling, distribution, importation, sale and storage of our products; (2) product and earnings claims and advertising, including direct claims and advertising by us, as well 6 Table of Contents as claims and advertising by independent consultants, for which we may be held responsible; (3) our direct selling program; (4) transfer pricing and similar regulations that affect the level of U.S. and foreign taxable income and customs duties; (5) taxation of our independent consultants (which in some instances may impose an obligation on us to collect the taxes and maintain appropriate records); and (6) currency exchange and repatriation.
Such Regulations exist at the federal, state or local levels in the United States and at all levels of government in foreign jurisdictions, including Regulations pertaining to: (1) the formulation, manufacturing, packaging, labeling, distribution, importation, sale and storage of our products; (2) product and earnings claims and advertising, including direct claims and advertising by us, as well as claims and advertising by independent consultants, for which we may be held responsible; (3) our direct selling program; 6 Table of Contents (4) transfer pricing and similar regulations that affect the level of U.S. and foreign taxable income and customs duties; (5) taxation of our independent consultants (which in some instances may impose an obligation on us to collect the taxes and maintain appropriate records); and (6) currency exchange and repatriation.
The FTC closely scrutinizes the use of testimonials, the role of expert endorsers and product clinical studies. The FTC has in recent years investigated and taken enforcement action against direct selling companies for misleading representations relating to the earnings potential of an independent consultant within a company’s compensation plan, as well as appropriateness of the compensation plans themselves.
The FTC closely scrutinizes the use of testimonials, the role of expert endorsers and product clinical studies. The FTC has in recent years investigated and taken enforcement action against direct selling companies for misleading representations relating to the earnings potential of an independent consultant within a company’s compensation plan, as well as the appropriateness of the compensation plans themselves.
In addition, regulations in existing and new markets often are ambiguous and subject to considerable interpretive and enforcement discretion by the responsible regulators. Moreover, even when we believe that we and our independent consultants are initially in compliance with all applicable regulations, new regulations regularly are being added and the interpretation of existing regulations is subject to change.
In addition, regulations in existing and new markets are often ambiguous and subject to considerable interpretive and enforcement discretion by the responsible regulators. Moreover, even when we believe that we and our independent consultants are initially in compliance with all applicable regulations, new regulations are regularly being added and the interpretation of existing regulations is subject to change.
In this event, we would attempt to devote the resources previously devoted to such market to a new market or markets or other existing markets. However, we cannot be sure that this transition would not have a material adverse effect on our business, results of operations, and financial condition either in the short or long-term.
In this event, we would attempt to devote the resources previously devoted to such a market to a new market or markets or other existing markets. However, we cannot be sure that this transition would not have a material adverse effect on our business, results of operations and/or financial condition either in the short or long-term.
Although we devote considerable resources to maintaining our compliance with regulatory constraints in each of our markets, we cannot be sure that (1) we would be found to be in full compliance with applicable regulations in all of our markets at any given time or (2) the regulatory authorities in one or more markets will not assert, either retroactively or prospectively or both, that our operations are not in full compliance.
Although we devote considerable resources to maintaining our compliance with regulatory constraints in each of our markets, we cannot be sure that (1) we would be found to be in full compliance with applicable regulations in all of our markets at any given time or (2) the regulatory authorities in one or more markets will not assert, retroactively or prospectively or both, that our operations are not in full compliance.
We purchase herbs and other raw materials in bulk, and after rigorous quality control testing, we formulate, encapsulate, tablet or concentrate them, label and package them for shipment. Most of our products are manufactured at our facility in Spanish Fork, Utah. Contract manufacturers produce some of our products in accordance with our specifications and standards.
We purchase herbs and other raw materials in bulk, and after quality control testing, we formulate, encapsulate, tablet or concentrate them, label and package them for shipment. Most of our products are manufactured at our facility in Spanish Fork, Utah. Contract manufacturers produce some of our products in accordance with our specifications and standards.
Although there can be no assurance that we will be successful in locating such sources of supply in the future, we believe that we will be able to do so. Trademarks and Trade Names We have obtained trademark registrations for Nature’s Sunshine®, and related logos for all of our Nature’s Sunshine Products product lines.
Although there can be no assurance that we will be successful in locating such sources of supply in the future, we believe that we will be able to do so. Trademarks and Trade Names We have obtained trademark registrations for Nature’s Sunshine® and related logos for our Nature’s Sunshine Products product lines.
We have also obtained trademark registrations for Synergy Worldwide® for all of our Synergy WorldWide product lines. We hold trademark registrations in the United States and in many other countries. Our customers’ recognition and association of our brands and trademarks with quality is an important element of our operating strategy.
We have also obtained trademark registrations for Synergy Worldwide® for our Synergy WorldWide product lines. We hold trademark registrations in the United States and in many other countries. Our customers’ recognition and association of our brands and trademarks with quality is an important element of our operating strategy.
These assertions or the effect of adverse regulations in one market could negatively affect us in other markets as well, by causing increased regulatory scrutiny in those other markets or as a result of the negative publicity generated in those other markets.
Either these assertions or the effect of adverse regulations in one market could negatively affect us in other markets as well, by causing increased regulatory scrutiny in those other markets or as a result of the negative publicity generated in those other markets.
Our failure to comply with these regulations can result in a product being removed from sale in a particular market, either temporarily or permanently. 7 Table of Contents Direct Selling Our business practices and products are also regulated by the following United States governmental entities: the Federal Trade Commission (“FTC”), Consumer Product Safety Commission (“CPSC”), Department of Agriculture (“USDA”) and Environmental Protection Agency (“EPA”).
Our failure to comply with these regulations can result in a product being removed from sale in a particular market, either temporarily or permanently. 7 Table of Contents Direct Selling In addition to the FDA, our business practices and products are also regulated by the following United States governmental entities: the Federal Trade Commission (“FTC”), Consumer Product Safety Commission (“CPSC”), Department of Agriculture (“USDA”) and Environmental Protection Agency (“EPA”).
Such regulatory provisions did not have a material effect upon our results of operations or competitive position during the year ended December 31, 2023. Regulation General In both the United States and foreign markets, we are affected by extensive laws, governmental regulations, administrative determinations and guidance, court decisions and similar constraints (collectively “Regulations”).
Such regulatory provisions did not have a material effect upon our results of operations or competitive position during the year ended December 31, 2024. Regulation General In both the United States and foreign markets we are affected by extensive laws, governmental regulations, administrative determinations and guidance, court decisions and similar constraints (collectively “Regulations”).
During the years ended December 31, 2023 and 2022, we experienced no major complications in obtaining and maintaining adequate sources of raw materials supply. We attempt to ensure the availability of many of our raw materials by contracting, in advance, for our annual requirements. In the past, we have been able to find alternative sources of raw materials when needed.
During the years ended December 31, 2024 and 2023, we experienced no major complications in obtaining and maintaining adequate sources of raw materials supply. We attempt to ensure the availability of many of our raw materials by contracting, in advance, for our annual requirements. In the past, we have been able to find alternative sources of raw materials when needed.
These assertions could have a material adverse effect on our results of operations and financial condition in a particular market or in general.
These assertions could also have a material adverse effect on our results of operations and financial condition in a particular market or in general.
We have implemented stringent quality control procedures to verify that our contract manufacturers have complied with our specifications and standards.
We have implemented quality control procedures to verify that our contract manufacturers have complied with our specifications and standards.
We are a Utah corporation formed in 1976 with our principal place of business in Lehi, Utah, and sell our products to a sales force of independent consultants who use the products themselves or resells them to consumers.
We are a Utah corporation formed in 1976 with our principal place of business in Lehi, Utah, and sell our products to a sales force of independent consultants who use the products themselves or resell them to consumers.
The weight management line has been designed to simplify the weight management process by providing healthy meal replacements and products that increase caloric burn rate. 4 Table of Contents Distribution and Marketing We market our products primarily through our network of independent consultants, who market our products to customers through direct selling techniques and sponsor other independent consultants who also market our products to customers.
The weight management line has been designed to simplify the weight management process by providing healthy meal replacements and products that increase caloric burn rate. 4 Table of Contents Distribution and Marketing We market our products primarily through our network of independent consultants, who market our products to customers through direct selling techniques.
The amounts of volume incentives that we expensed during the years ended December 31, 2023 and 2022, are set forth in our Consolidated Financial Statements in Item 8 of this report.
The amounts of volume incentives that we expensed during the years ended December 31, 2024 and 2023, are set forth in our Consolidated Financial Statements in Item 8 of this report.
A summary of the U.S. dollar amounts from the sale of general health, immune, cardiovascular, digestive, personal care and weight management products for the years ended December 31, 2023 and 2022, by business segment can be found in Note 12, “Operating Business Segment and International Operation Information,” to our Consolidated Financial Statements, in Item 8, Part 2 of this report.
A summary of the U.S. dollar amounts from the sale of general health, immune, cardiovascular, digestive, personal care and weight management products for the years ended December 31, 2024 and 2023, by business segment can be found in Note 12, “Business Segment and International Operation Information,” to our Consolidated Financial Statements, in Item 8, Part 2 of this report.
Participants have many reward options to choose from such as swag, gift cards, and product credit. • Stringent safety standards and promotion of a company culture that prioritizes safety throughout our manufacturing and distributions centers around the world.
Participants have many reward options to choose from such as swag, gift cards and product credit. 9 Table of Contents • Stringent safety standards and promotion of a company culture that prioritizes safety throughout our manufacturing and distributions centers around the world.
This represents a relatively small part of our total business. Our products sold in the United States are shipped directly from our manufacturing and warehouse facilities located in Spanish Fork, Utah, as well as from our regional warehouses located in Georgia, Ohio and Texas. Many of our international operations maintain warehouse facilities and inventory to supply their independent consultants.
Our products sold in the United States are shipped directly from our manufacturing and warehouse facilities located in Spanish Fork, Utah, as well as from our regional warehouses located in Georgia, Ohio and Texas. Many of our international operations maintain warehouse facilities and inventory to supply their independent consultants.
For avoidance of doubt, “Operational Compliance” does not include adherence to the U.S. Foreign Corrupt Practices Act (the “FCPA”), which is the responsibility of the Audit Committee. Human Capital Attracting and retaining top talent is an integral part to our success.
This does not include adherence to the U.S. Foreign Corrupt Practices Act (the “FCPA”), which is the responsibility of the Audit Committee. Human Capital Attracting and retaining top talent in all roles and at all career levels is an integral part to our success.
Research and Development We conduct research at our research center, known as the Hughes Center for Research and Innovation, a state of the art research and development facility located at our corporate offices in Lehi, Utah.
Research and Development We conduct research at our research center, known as the Hughes Center for Research and Innovation, a state-of-the-art research and development facility located at our corporate offices in Lehi, Utah. Our principal emphasis in our research and development activities is clinical research in the support of the development of new products and the enhancement of existing products.
Some examples of our key programs and initiatives that are focused on attracting and retaining top talent include: • Annual scholarship program for multicultural students at the University of Utah in the amount of $0.2 million to be completed by December 31, 2024. 9 Table of Contents • Leadership development program designed to help employees develop leadership skills and obtain executive coaching over a three-year period. • Competitive wage and benefits package building loyalty and engagement in Company performance. • Hybrid work model that recognizes the evolving needs of workers and allows them to build a hybrid work schedule providing greater flexibility for their personal needs. • A wellness rewards program that rewards healthy behaviors such as healthy eating, exercise, and wellness ambassadorship.
Key initiatives focused on attracting and retaining top talent include, but not limited to the following: • Leadership development program designed to help employees develop leadership skills and obtain executive coaching over a three-year period. • Competitive wage and benefits package building loyalty and engagement in Company performance. • Hybrid work model that recognizes the evolving needs of workers and allows them to build a hybrid work schedule providing greater flexibility for their personal needs. • A wellness rewards program that rewards healthy behaviors such as healthy eating, exercise and wellness ambassadorship.
We choose supply partners with business models that value making a positive impact on the environments and economies that they source from and, in many cases, go to creative lengths to bring benefits to the communities they operate within. During the year ended December 31, 2022, we accomplished our goal of using 100 percent renewable energy at our manufacturing facility.
We choose supply partners with business models that value making a positive impact on the environments and economies that they source from and, in many cases, go to creative lengths to bring benefits to the communities they operate within.
We seek to motivate and provide incentives to our independent consultants by offering high quality products and providing independent consultants with product support, training seminars, sales conventions, travel programs and financial incentives. We also utilize direct-to-consumer channels, selling our products through our own website as well as on other e-commerce platforms.
We seek to motivate and provide incentives to our independent consultants by offering high quality products and providing independent consultants with product support, training seminars, sales conventions, travel programs and financial incentives.
The Company has a dedicated Risk Management Committee as part of the Board of Directors (the “Risk Management Committee”). The purpose of the Risk Management Committee is to oversee our efforts with respect to operational compliance.
The Company has a dedicated Risk Management Committee as part of the Board of Directors (the “Risk Management Committee”).
We intentionally build a workforce of people with viewpoints and backgrounds as diverse as the customers we serve around the world. As a responsibility to our team and in an evolving effort, we provide employees with meaningful careers and development opportunities to grow and succeed. We employed 814 individuals as of December 31, 2023.
As a responsibility to our team and in an evolving effort, we provide employees with meaningful careers and development opportunities to grow and succeed in an environment built on mutual respect and accountability.
Information found on the Company’s website is not part of this Annual Report on Form 10-K or any other report filed with the United States Securities and Exchange Commission. A vailable Information Our principal executive office is located at 2901 West Blue Grass Blvd., Suite 100, Lehi, Utah 84043.
To learn more about our environmental, social and governance (“ESG”) initiatives, as well as review our annual ESG report and accompanying policies, access the ESG section of our website at: https://ir.naturessunshine.com/esg. Information found on the Company’s website is not part of this Annual Report on Form 10-K or any other report filed with the United States Securities and Exchange Commission.
Our telephone number is (801) 341-7900 and our Internet website address is www.natr.com .
A vailable Information Our principal executive office is located at 2901 West Blue Grass Blvd., Suite 100, Lehi, Utah 84043. Our telephone number is (801) 341-7900 and our Internet website address is www.natr.com .
Removed
Our principal emphasis in our research and development activities is clinical research in the support of the development of new products and the enhancement of existing products.
Added
The purpose of the Risk Management Committee is to oversee our efforts with respect to legal and regulatory requirements and identification and assessment of key strategic and operational risks facing the business that may impact the organization’s strategy and objectives, including ensuring that the ERM governance, framework and capabilities support the full risk management lifecycle.
Removed
“Operational Compliance” is defined by the Risk Management Committee’s charter to include: consultant compliance and direct selling best practices; employee compliance, including code of conduct and other mandated trainings; product and product distribution regulatory compliance, including adherence to FTC, FDA and other similar regulatory bodies’ mandates; compliance with data protection regulations; and non-financial, whistleblower reports.
Added
Our hiring practices focus on the skills and qualifications of a candidate relative to the job requirements. As of December 31, 2024 we employed 819 individuals with viewpoints and backgrounds as diverse as the customers we serve around the world.
Removed
Our global workforce is comprised of the following ethnicities: 37.8 percent Caucasian, 32.0 percent Asian, 27.5 percent Hispanic, 2.0 percent Black, and 0.7 percent Other. Of those employees, 55.6 percent are female and 44.4 percent are male.
Added
In May 2024, we achieved our goal of zero waste at our distribution centers and received the TRUE Zero Waste Gold Certification. Since the year ended December 31, 2022, we have maintained the use of 100 percent renewable energy at our manufacturing facility.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf our remediation measures are insufficient to address the material weaknesses, or if additional material weaknesses or significant deficiencies in our internal control are discovered or occur in the future, our financial statements may contain material misstatements, we could experience another financial loss, or we could be required to restate our financial results, which could lead to substantial additional costs for accounting and legal fees and stockholder litigation. 17 Table of Contents Any failure to maintain such internal control could adversely impact our ability to report our financial position and results from operations on a timely and accurate basis, and result in unauthorized access to our assets, including through unauthorized wire transfers.
Biggest changeIf our remediation measures are insufficient to address the material weaknesses, or if additional material weaknesses or significant deficiencies in our internal control are discovered or occur in the future, our financial statements may contain material misstatements, we could experience another financial loss or we could be required to restate our financial results, which could lead to substantial additional costs for accounting and legal fees and stockholder litigation.
These laws and regulations are generally intended to prevent fraudulent or deceptive practices and to ensure that sales are made to consumers of the products, and that compensation is based primarily upon bone fide sale of products to consumers and not primarily upon the recruitment of other persons as participants in the compensation program.
These laws and regulations are generally intended to prevent fraudulent or deceptive practices, to ensure that sales are made to consumers of the products and that compensation is based primarily upon bone fide sale of products to consumers and not primarily upon the recruitment of other persons as participants in the compensation program.
We may also experience significant interruptions of our manufacturing operations, delays in our ability to deliver products, increased costs or customer order cancellations as a result of: 15 Table of Contents • the failure or inability to accurately forecast demand and obtain sufficient quantities of quality raw materials on a cost-effective basis; • volatility in the availability and cost of materials or services, including rising prices due to inflation; • difficulties or delays in obtaining required import or export approvals; • shipment delays due to transportation interruptions or capacity constraints, such as reduced availability of air or ground transport or port closures; • information technology or infrastructure failures, including those of a third-party supplier or service provider; and • natural disasters or other events beyond our control (such as earthquakes, utility interruptions, tsunamis, hurricanes, typhoons, floods, storms or extreme weather conditions, fires, regional economic downturns, regional or global health epidemics, pandemics, geopolitical turmoil, increased trade restrictions between the U.S. and China and other countries, social unrest, political instability, terrorism, or acts of war) in locations where we or our customers or suppliers have manufacturing or other operations.
We may also experience significant interruptions of our manufacturing operations, delays in our ability to deliver products, increased costs or customer order cancellations as a result of: • the failure or inability to accurately forecast demand and obtain sufficient quantities of quality raw materials on a cost-effective basis; 15 Table of Contents • volatility in the availability and cost of materials or services, including rising prices due to inflation; • difficulties or delays in obtaining required import or export approvals; • shipment delays due to transportation interruptions or capacity constraints, such as reduced availability of air or ground transport or port closures; • information technology or infrastructure failures, including those of a third-party supplier or service provider; and • natural disasters or other events beyond our control (such as earthquakes, utility interruptions, tsunamis, hurricanes, typhoons, floods, storms or extreme weather conditions, fires, regional economic downturns, regional or global health epidemics, pandemics, geopolitical turmoil, increased trade restrictions between the U.S. and China and other countries, social unrest, political instability, terrorism, or acts of war) in locations where we or our customers or suppliers have manufacturing or other operations.
We have other intellectual property that we consider valuable, including trademarks for the Nature’s Sunshine Products and Synergy names and logos.
We have other intellectual property that we consider valuable, including trademarks for the Nature’s Sunshine Products and Synergy Worldwide names and logos.
If we fail to timely and effectively obtain shipments of products from our manufacturers and deliver products to our independent consultants and customers, our business and results of operations could be harmed. Our business depends on our ability to source and distribute products in a timely manner.
If we fail to timely and effectively obtain shipments of products from our suppliers and deliver products to our independent consultants and customers, our business and results of operations could be harmed. Our business depends on our ability to source and distribute products in a timely manner.
The loss or inactivity of one of these independent consultants who, together with their extensive sales network, generate a significant amount of our net sales could have a material adverse effect on our results of operations and financial condition. Our expansion in China is subject to risks associated with operating a joint venture.
The loss or inactivity of one of these independent consultants who, together with their extensive sales network, generate a significant amount of our net sales could have a material adverse effect on our results of operations and financial condition. 13 Table of Contents Our expansion in China is subject to risks associated with operating a joint venture.
An enforcement action brought by a government agency, like the FTC in the United States, or a class action lawsuit, could adversely affect our 11 Table of Contents reputation and potentially result in significant penalties and costs, either of which could have a material adverse effect on our results of operations and financial condition.
An enforcement action brought by a government agency, like the FTC in the United States, or a class action lawsuit, could adversely affect our reputation and potentially result in significant penalties and costs, either of which could have a material adverse effect on our results of operations and financial condition.
Regulators in the United States and in foreign markets closely monitor our corporate structures, intercompany transactions, and how we effectuate intercompany fund transfers. Our effective tax rate could increase, and our results of operations and financial condition could be 16 Table of Contents materially adversely affected if regulators challenge our corporate structures, transfer pricing methodologies or intercompany transfers.
Regulators in the United States and in foreign markets closely monitor our corporate structures, intercompany transactions and how we effectuate intercompany fund transfers. Our effective tax rate could increase, and our results of operations and financial condition could be materially adversely affected if regulators challenge our corporate structures, transfer pricing methodologies or intercompany transfers.
In preparing our financial statements, we translate net sales and expenses in 13 Table of Contents foreign countries from their local currencies into U.S. dollars using average exchange rates. Because a majority of our sales are in foreign countries, exchange rate fluctuations may have a significant effect on net sales and earnings.
In preparing our financial statements, we translate net sales and expenses in foreign countries from their local currencies into U.S. dollars using average exchange rates. Because a majority of our sales are in foreign countries, exchange rate fluctuations may have a significant effect on net sales and earnings.
We are eligible to receive foreign tax credits in the United States for certain foreign taxes paid abroad. In the event any audits or assessments are concluded adversely to us, we may not be able to offset the consolidated effect of foreign income tax assessments through the use of U.S. foreign tax credits.
We are eligible to receive foreign tax credits in the United States for certain foreign taxes paid abroad. In the event any audits or 16 Table of Contents assessments are concluded adversely to us, we may not be able to offset the consolidated effect of foreign income tax assessments through the use of U.S. foreign tax credits.
Certain suppliers, vendors, independent distributors and customers are all impacted by the war and their ability to successfully maintain their operations could also impact our results of operations or product sales throughout the world. High inflation and other difficult economic conditions could adversely affect our results of operations and financial condition.
Certain suppliers, vendors, independent distributors and customers are all impacted by the war and their ability to successfully maintain their operations could also impact our results of operations or product sales throughout the world. Difficult economic conditions could adversely affect our results of operations and financial condition.
For example, in recent years, U.S. based direct selling companies with operations in 12 Table of Contents China have been the subject of investigations and enforcement actions, or in some cases have initiated their own internal investigation, relating to alleged violations of the FCPA.
For example, in recent years, U.S. based direct selling companies with operations in China have been the subject of investigations and enforcement actions or, in some cases, have initiated their own internal investigation relating to alleged violations of the FCPA.
Accordingly, we are subject to the risks, including labor disputes, union organizing activity, inclement weather, public health crises such as pandemics or epidemics, and increased transportation costs, associated with our third-party contract manufacturers’ and carriers’ ability to provide products and services to meet our requirements.
Accordingly, we are subject to risks, including treaties, tariffs, sanctions, labor disputes, union organizing activity, inclement weather, public health crises such as pandemics or epidemics and increased transportation costs, associated with our third-party contract manufacturers’ and carriers’ ability to provide products and services to meet our requirements.
In addition, we may face potential for litigation or other disputes which may include, among others, claims invoking the federal and state securities laws, contractual claims or other claims arising from any restatement and material weaknesses in our internal controls over financial reporting.
In addition, we may face potential for litigation or other disputes which may include, among others, claims invoking the federal and state securities laws, contractual claims or other claims arising from any restatement and material weaknesses in our internal controls over financial 17 Table of Contents reporting.
In 2023, we recognized approximately 71.0 percent of our net sales in markets outside the United States, the majority of which were recognized in each market’s respective local currency. We purchase inventory from companies in foreign markets and in the United States, primarily in U.S. dollars.
In 2024, we recognized approximately 71.8 percent of our net sales in markets outside the United States, the majority of which were recognized in each market’s respective local currency. We purchase inventory from companies in foreign markets and in the United States, primarily in U.S. dollars.
We may not be able to operate in many areas due to damage and safety concerns. Within Russia, we may need to further reduce our operations due to sanctions and counter sanctions, currency or payment controls, and supply chain challenges.
We may not be able to operate in many areas due to damage and safety concerns. Within Russia, we may need to further reduce our operations 14 Table of Contents due to sanctions and counter sanctions, currency or payment controls and supply chain challenges.
We are subject to anti-bribery laws, including the FCPA, which generally prohibit companies and their intermediaries from making improper payments for the purpose of obtaining or retaining business as well as requiring companies and their intermediaries to maintain accurate books and records.
We are subject to anti-bribery laws, including the Foreign Corrupt Practices Act (“FCPA”). We are subject to anti-bribery laws, including the FCPA, which generally prohibit companies and their intermediaries from making improper payments for the purpose of obtaining or retaining business as well as requiring companies and their intermediaries to maintain accurate books and records.
In addition, a determination by a court or government agency that any of our practices, or those of our independent consultants, do not meet these standards could result in liability or adverse publicity, which could have a material adverse effect on our results of operations and financial condition. System failures could adversely affect our results of operations and financial condition.
In addition, a determination by a court or government agency that any of our practices, or those of our independent consultants, do not meet 18 Table of Contents these standards could result in liability or adverse publicity, which could have a material adverse effect on our results of operations and financial condition.
We carry product liability insurance coverage; however, such insurance may not be sufficient to cover one or more large claims, or the insurer may successfully disclaim coverage as to a pending or future claim, which could have a material adverse effect on our results of operations and financial condition. We are subject to anti-bribery laws, including the FCPA.
We carry product liability insurance coverage; however, such 12 Table of Contents insurance may not be sufficient to cover one or more large claims, or the insurer may successfully disclaim coverage as to a pending or future claim, which could have a material adverse effect on our results of operations and financial condition.
Risks Related to Our Use of Technology and Intellectual Property If we fail to maintain an effective system of internal controls, we may not be able to report our financial results accurately, may make a material misstatement in our financial statements, or may experience a financial loss.
If we fail to maintain an effective system of internal controls, we may not be able to report our financial results accurately, may make a material misstatement in our financial statements, or may experience a financial loss.
Difficulties in registering our products for sale in Mainland China could have a material adverse effect on our results of operations and financial condition. Our registration of our products for sale in China is extremely time intensive.
Difficulties in registering our products for sale in foreign countries could have a material adverse effect on our results of operations and financial condition. Our registration of our products for sale in certain countries can be extremely time intensive.
The requirements for obtaining product registrations and/or licenses involve extended periods of time that may delay us from offering products for sale or prevent us from launching new product initiatives in China on the same timelines as other markets around the world.
These requirements for obtaining product registrations and/or licenses could involve extended periods of time that may delay us from offering products for sale or prevent us from launching new product initiatives in those countries in the same timelines as other markets with less time intensive registrations.
Some data we store, process and use, contains personal information, which subjects us to a variety of privacy, rights of publicity, data protection, content, protection of minors, and consumer protection laws and regulations in the United States and other countries. These laws and regulations are evolving in both the United States and in other countries.
Some data we store, process and use, contains personal information, which subjects us to a variety of privacy, rights of publicity, data protection, content, protection of minors and consumer protection laws and regulations in the United States and other countries. Such laws and regulations may impose significant fines or penalties and can be particularly restrictive.
Our business prospects, financial condition or results of operations could be adversely affected by any of the following risks.
Our business prospects, financial condition or results of operations could be adversely affected by any of the following risks. If we are adversely affected by such risks, the market price of our common stock could decline.
If such unauthorized transfers are not prevented or detected in a timely manner, our financial position could be adversely affected. Ineffective internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock.
Ineffective internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock.
Any such litigation or dispute, whether successful or not, could have a material adverse effect on our business, results of operations and financial condition. Cybersecurity risks and the failure to maintain the integrity of data could expose us to data loss, litigation and liability, which could adversely affect our results of operations and financial condition.
Any such litigation or dispute, whether successful or not, could have a material adverse effect on our business, results of operations and financial condition.
We cannot assure you that the privacy policies and other statements regarding our practices will be found sufficient to protect us from liability or adverse publicity relating to the privacy and security of personal information.
We cannot guarantee that the privacy policies and other statements regarding our practices will be found to be sufficient to protect us from liability or adverse publicity relating to the privacy and security of personal information. Whether and how existing domestic and international privacy and consumer protection laws and regulations apply is still uncertain and may take years to resolve.
In the future, we may be subject to additional laws or regulations administered by the FDA or other federal, state, local or foreign regulatory authorities, the repeal or amendment of laws or regulations which we consider favorable and/or more stringent interpretations of current laws or regulations.
As the primary manufacturer of our own products, we are subject to FDA regulations on Good Manufacturing Practices (“GMP”), which require us to maintain good manufacturing processes, including ingredient identification, manufacturing controls and record keeping. 11 Table of Contents In the future, we may be subject to additional laws or regulations administered by the FDA or other federal, state, local or foreign regulatory authorities, the repeal or amendment of laws or regulations which we consider favorable and/or more stringent interpretations of current laws or regulations.
If we are adversely affected by such risks, the market price of our common stock could decline. 10 Table of Contents Regulatory and Litigation Risks Laws and regulations regarding direct selling may prohibit or restrict our ability to sell our products in some markets or require us to make changes to our business model in some markets.
Laws and regulations regarding direct selling may prohibit or restrict our ability to sell our products in some markets or require us to make changes to our business model in some markets. Direct selling companies are subject to laws and regulations by various government agencies throughout the world.
Some states’ attorneys general have, from time to time, demonstrated a focus on the manufacture and sale of various dietary supplements. As the primary manufacturer of our own products, we are subject to FDA regulations on Good Manufacturing Practices (“GMP”), which require us to maintain good manufacturing processes, including ingredient identification, manufacturing controls and record keeping.
Some states’ attorneys general have, from time to time, demonstrated a focus on the manufacture and sale of various dietary supplements.
Removed
Direct selling companies are subject to laws and regulations by various government agencies throughout the world.
Added
Regulatory and Litigation Risks Our global operations are subject to numerous laws and regulations relating to trade restrictions and export controls and failure to comply with such rules could adversely affect our business. Our global operations are subject to numerous trade and economic sanctions and other restrictions imposed by the U.S., the EU and other governments and organizations. The U.S.
Removed
For example, products marketed in China as “health foods” or for which certain claims are used are subject to “blue cap” or “blue hat” registrations, which involve extensive laboratory and clinical analysis by governmental authorities. This registration process can take anywhere from 18 months to 3 years but may be substantially longer.
Added
Departments of Justice, Commerce, State and Treasury and other federal agencies and authorities have a broad range of civil and criminal penalties they may seek to impose against corporations and individuals for violations of economic sanctions laws, export control laws and other federal statutes and regulations, including those established by the Office of Foreign Assets Control (“OFAC”).
Removed
We currently market both “health foods” and “general foods” in China. There is risk associated with the common practice in China of marketing a product as a “general food” while seeking “health food” classification.
Added
Under these laws and regulations, as well as other anti-corruption laws, anti-money-laundering laws, export control laws, customs laws, sanctions laws and other laws 10 Table of Contents governing our operations, various government agencies may require export licenses, may seek to impose modifications to business practices, including cessation of business activities in sanctioned countries or with sanctioned persons or entities and modifications to compliance programs, which may increase compliance costs and may subject us to fines, penalties and other sanctions.
Removed
If government officials feel the categorization of products is inconsistent with product claims, ingredients or function, this could end or limit our ability to market such products in China and have a material adverse effect on our results of operations and financial condition.
Added
A violation of these laws, regulations, policies or procedures could adversely impact our business, results of operations and financial condition. For example, in November 2024 we began an internal investigation regarding our past compliance with relevant U.S. trade controls and made voluntary disclosures of apparent trade controls violations to the U.S. Department of Commerce's Bureau of Industry and Security (“BIS”).
Removed
Consumer spending, including spending for our products, is affected by, among other things, prevailing economic conditions, including, among others, unemployment rates, inflation, fuel prices, salaries and wages, the availability of consumer credit, consumer confidence and consumer perception of economic conditions. The rate of inflation recently reached its highest level in the U.S. in over forty years.
Added
We estimate that such potential violations being investigated represented less than one percent of our net revenue in each of our last three fiscal years. An unfavorable outcome of this investigation may include fines or penalties imposed in response to our voluntary disclosures.
Removed
Europe and other areas in which we do business are also experiencing higher than desired inflation. Inflation may require consumers to reconsider purchases of items they consider nonessential and, as a result, consumers may purchase fewer of our products if they consider our products nonessential.
Added
While we believe the amount of any fines or penalties would not be material to our financial condition and results of operation, we are unable to predict the outcome or to reasonably estimate the time it may take to resolve these matters.
Removed
We believe high levels of inflation in the U.S. and other regions in which we do business have resulted, and will continue to result, in increased input costs and lower 14 Table of Contents net sales of our products. We may not be able to pass any inflation-related increases on to customers without adversely affecting net sales.
Added
Although we have implemented policies and procedures in these areas, we cannot assure you that our policies and procedures are sufficient or that directors, officers, employees, representatives, manufacturers, suppliers and agents have not engaged and will not engage in conduct in violation of such policies and procedures.
Removed
A prolonged period of high inflation, recession, and other unfavorable economic conditions that adversely affect the ability of consumers to pay for our products could have a material adverse effect on our business, financial condition, cash flows, and results of operations. Difficult economic conditions could adversely affect our results of operations and financial condition.
Added
Any failure to maintain such internal control could adversely impact our ability to report our financial position and results from operations on a timely and accurate basis and result in unauthorized access to our assets, including through unauthorized wire transfers. If such unauthorized transfers are not prevented or detected in a timely manner, our financial position could be adversely affected.
Removed
In the first quarter of 2023, we identified a material weakness in internal controls over financial reporting related to the prevention and timely detection of unauthorized wire transfers.
Added
Risks Related to Our Use of Technology and Intellectual Property Cybersecurity risks and the failure to maintain the integrity of data could expose us to data loss, litigation and liability, which could adversely affect our results of operations and financial condition.
Removed
Because the material weakness resulted in the inability to prevent and timely detect misappropriation of cash assets , our management concluded that at March 31, 2023, the Company’s internal control over financial reporting was ineffective.
Added
System failures could adversely affect our results of operations and financial condition.
Removed
Such laws and regulations may impose significant fines or penalties and can be particularly restrictive.
Removed
Whether and how 18 Table of Contents existing domestic and international privacy and consumer protection laws and regulations apply is still uncertain and may take years to resolve.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

1 edited+0 added−0 removed12 unchanged
Biggest changeMeetings of our Risk Management Committee and Board of Directors include discussions and presentations from management regarding specific risk areas throughout the year, including, among others, those relating to cybersecurity threats, and reports from management on our enterprise risk profile on an annual basis.
Biggest changeMeetings of our Risk Management Committee and Board of Directors include discussions and presentations by management regarding specific risk areas throughout the year, including, among others, those relating to cybersecurity threats and reports from management on our enterprise risk profile on an annual basis.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

7 edited+0 added−0 removed5 unchanged
Biggest changeIssuer Stock Purchases The following table summarizes the purchases of our common stock during the quarter ended December 31, 2023: Periods Total Number of Shares Purchased (in thousands) Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (in thousands) Maximum Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (1) (in thousands) October 1, 2023 to October 31, 2023 24 16.4 24 November 1, 2023 to November 30, 2023 173 17.28 173 December 1, 2023 to December 31, 2023 47 $ 16.82 47 Total 244 244 $ 17,598 (1) On March 10, 2021, we announced a $15.0 million common share repurchase program.
Biggest changeIssuer Stock Purchases The following table summarizes the purchases of our common stock during the quarter ended December 31, 2024: Periods Total Number of Shares Purchased (in thousands) Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (in thousands) Maximum Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (1) (in thousands) October 1, 2024 to October 31, 2024 29 12.89 29 November 1, 2024 to November 30, 2024 1 12.99 1 December 1, 2024 to December 31, 2024 — $ — — Total 30 30 $ 8,781 (1) On March 10, 2021, we announced a $15.0 million common share repurchase program.
We have no obligation to repurchase any common shares under the authorization, and the repurchase plan may be suspended, discontinued, or modified at any time and for any reason. 21 Table of Contents Performance Graph The graph below depicts our common stock as an index, assuming $100.00 was invested on December 31, 2018, along with the composite prices of companies listed on the NASDAQ Stock Market and a selection of our peer group.
We have no obligation to repurchase any common shares under the authorization, and the repurchase plan may be suspended, discontinued or modified at any time and for any reason. 21 Table of Contents Performance Graph The graph below depicts our common stock as an index, assuming $100.00 was invested on December 31, 2019, along with the composite prices of companies listed on the NASDAQ Stock Market and a selection of our peer group.
On March 8, 2022 we announced an amendment to the share repurchase program allowing the repurchase of an additional $30.0 million shares. The repurchases may be made from time to time as market conditions warrant and are subject to regulatory considerations. For the year ended December 31, 2023, we repurchased 424,000 shares of our common stock for $6.4 million.
On March 8, 2022 we announced an amendment to the share repurchase program allowing the repurchase of an additional $30.0 million shares. The repurchases may be made from time to time as market conditions warrant and are subject to regulatory considerations. For the year ended December 31, 2024, we repurchased 540,000 shares of our common stock for $8.9 million.
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities Market and Share Prices Our common stock is traded on the NASDAQ Global Market (symbol “NATR”). The approximate number of our shareholders of record as of February 23, 2024, was 1,224.
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities Market and Share Prices Our common stock is traded on the NASDAQ Global Market (symbol “NATR”). The approximate number of our shareholders of record as of February 21, 2025, was 1,131.
No dividend was paid for the year ended December 31, 2023.
No dividend was paid for the year ended December 31, 2024.
At December 31, 2023, the remaining balance available for repurchases under the program was $17.6 million.
At December 31, 2024, the remaining balance available for repurchases under the program was $8.8 million.
The material in this section captioned “Performance Graph” is being furnished and shall not be deemed “filed” with the SEC for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section, nor shall the material in this section be deemed to be incorporated by reference in any registration statement or other document filed with the SEC under the Securities Act of 1933, except to the extent we specifically and expressly incorporate it by reference into such filing. 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 Nature’s Sunshine Products, Inc. $ 100.00 $ 109.57 $ 183.44 $ 239.68 $ 107.79 $ 224.01 NASDAQ Index 100.00 136.69 198.10 242.03 163.28 236.17 Peer Group 100.00 75.99 81.74 77.64 42.37 33.34 Item 6. [Reserved]
The material in this section captioned “Performance Graph” is being furnished and shall not be deemed “filed” with the SEC for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section, nor shall the material in this section be deemed to be incorporated by reference in any registration statement or other document filed with the SEC under the Securities Act of 1933, except to the extent we specifically and expressly incorporate it by reference into such filing. 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 Nature’s Sunshine Products, Inc. $ 100.00 $ 167.41 $ 218.75 $ 98.38 $ 204.44 $ 173.34 NASDAQ Index 100.00 144.92 177.06 119.45 172.77 223.87 Peer Group 100.00 107.57 102.17 55.76 43.88 23.64 Item 6. [Reserved]

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

60 edited+10 added−18 removed41 unchanged
Biggest changeAt December 31, 2023, we had $82.4 million in cash and cash 29 Table of Contents equivalents, of which $67.0 million was held in our foreign markets and may be subject to various withholding taxes and other restrictions related to repatriation before becoming available to be used along with the normal cash flows from operations to fund any unanticipated shortfalls in future cash flows.
Biggest changeAt December 31, 2024, we had $84.7 million in cash and cash equivalents, of which $71.5 million was held in our foreign markets and may be subject to various withholding taxes and other restrictions related to repatriation before becoming available to be used along with the normal cash flows from operations to fund any unanticipated shortfalls in future cash flows. 29 Table of Contents Our net consolidated cash inflows (outflows) are as follows ( in thousands ): Year Ended December 31, 2024 2023 Operating activities $ 25,298 $ 41,226 Investing activities (10,971) (10,478) Financing activities (9,905) (7,956) Operating Activities For the year ended December 31, 2024, operating activities provided cash in the amount of $25.3 million compared to $41.2 million in 2023.
Revenue Recognition Our revenue recognition practices are discussed in Note 2, “Revenue Recognition,” to our Consolidated Financial Statements, in Item 8, Part 2 of this report. Inventories Inventories are adjusted to lower of cost and net realizable value, using the first-in, first-out method. The components of inventory cost include raw materials, labor and overhead.
Revenue Recognition Our revenue recognition practices are discussed in Note 2, “Revenue Recognition,” to our Consolidated Financial Statements, in Item 8, Part 2 of this report. Inventories Inventories are adjusted to the lower of cost and net realizable value, using the first-in, first-out method. The components of inventory cost include raw materials, labor and overhead.
(4) We entered into the revolving Credit Agreement with Bank of America, N.A., that permits us to borrow up to $25.0 million through July 1, 2027, bearing interest at the greater of BSBY Daily Floating Rate or the Index Floor, plus 1.50 percent. We must pay an annual commitment fee of 0.25 percent on the unused portion of the commitment.
(4) We entered into the revolving Credit Agreement with Bank of America, N.A., that permits us to borrow up to $25.0 million through July 1, 2027, bearing interest at the greater of SOFR Daily Floating Rate or the Index Floor, plus 1.50 percent. We must pay an annual commitment fee of 0.25 percent on the unused portion of the commitment.
Quantitative and Qualitative Disclosures About Market Risk . 26 Table of Contents Year Ended December 31, 2023, as Compared to the Year Ended December 31, 2022 Net Sales The following table summarizes the changes in net sales by operating segment with a reconciliation to net sales, excluding the impact of currency fluctuations for the years ended December 31, 2023 and 2022 (dollar amounts in thousands).
Quantitative and Qualitative Disclosures About Market Risk . 26 Table of Contents Year Ended December 31, 2024, as Compared to the Year Ended December 31, 2023 Net Sales The following table summarizes the changes in net sales by operating segment with a reconciliation to net sales, excluding the impact of currency fluctuations for the years ended December 31, 2024 and 2023 (dollar amounts in thousands).
Further information related to our Asia, Europe, North America, and Latin America and Other business segments is set forth in Note 12, “Operating Business Segment and International Operation Information,” to our Consolidated Financial Statements, in Item 8, Part 2 of this report.
Further information related to our Asia, Europe, North America and Latin America and Other business segments is set forth in Note 12, “Business Segment and International Operation Information,” to our Consolidated Financial Statements, in Item 8, Part 2 of this report.
RESULTS OF OPERATIONS The following table summarizes our consolidated net income (loss) from continuing operations results as a percentage of net sales for the periods indicated: Year Ended December 31, 2023 2022 Net sales 100.0 % 100.0 % Cost of sales (27.9) (29.0) Gross profit 72.1 71.0 Operating expenses: Volume incentives 30.4 30.9 Selling, general and administrative 37.5 36.3 Operating income 4.2 3.8 Other income (expense): Interest and other income, net 0.1 — Interest expense — (0.1) Foreign exchange losses, net 0.2 (0.2) 0.3 (0.3) Income before provision for income taxes 4.5 3.5 Provision for income taxes 0.9 3.5 Net income (loss) 3.6 % — % Net Sales International operations have provided, and are expected to continue to provide, a significant portion of our total net sales.
RESULTS OF OPERATIONS The following table summarizes our consolidated net income (loss) from continuing operations results as a percentage of net sales for the periods indicated: Year Ended December 31, 2024 2023 Net sales 100.0 % 100.0 % Cost of sales (28.5) (27.9) Gross profit 71.5 72.1 Operating expenses: Volume incentives 30.9 30.4 Selling, general and administrative 36.1 37.5 Operating income 4.5 4.2 Other income (expense): Interest and other income, net — 0.1 Interest expense — — Foreign exchange gains (losses), net (0.4) 0.2 (0.4) 0.3 Income before provision for income taxes 4.1 4.5 Provision for income taxes 2.3 0.9 Net income 1.8 % 3.6 % Net Sales International operations have provided, and are expected to continue to provide, a significant portion of our total net sales.
We retain a significant portion of the risks associated with certain employee medical benefits and product liability insurance. Recorded liabilities for self-insured risks are calculated using actuarial methods and are not discounted. Amounts for self-insurance obligations are included in accrued liabilities and long-term other liabilities on the consolidated balance sheet.
We retain a significant portion of the risks associated with certain employee medical benefits and product liability insurance. Recorded liabilities for self-insured risks are 30 Table of Contents calculated using actuarial methods and are not discounted. Amounts for self-insurance obligations are included in accrued liabilities and long-term other liabilities on the consolidated balance sheet.
We have entered into long-term agreements with third-parties in the ordinary course of business, in which we have agreed to pay a percentage of net sales in certain regions in which we operate, or royalties on certain products. In 2023 and 2022, the aggregate amounts of these payments were $8,000 and $12,000, respectively.
We have entered into long-term agreements with third-parties in the ordinary course of business, in which we have agreed to pay a percentage of net sales in certain regions in which we operate or royalties on certain products. In 2024 and 2023, the aggregate amounts of these payments were $8,000 and $8,000, respectively.
As we cannot easily determine when our officers and key employees will separate from us, we are unable to estimate the years in which cash settlement may occur. (3) At December 31, 2023, there were $0.3 million of liabilities.
As we cannot easily determine when our officers and key employees will separate from us, we are unable to estimate the years in which cash settlement may occur. (3) At December 31, 2024, there were $0.6 million of liabilities.
We had accrued incentive trip costs of approximately $4.8 million and $5.8 million at December 31, 2023 and 2022, respectively, which are included in accrued liabilities in the consolidated balance sheets. 24 Table of Contents Contingencies We are involved in certain legal proceedings.
We had accrued incentive trip costs of approximately $5.2 million and $4.8 million at December 31, 2024 and 2023, respectively, which are included in accrued liabilities in the consolidated balance sheets. 24 Table of Contents Contingencies We are involved in certain legal proceedings.
At December 31, 2023, we had $25.0 million available under this facility. At December 31, 2023, there was no outstanding balance under the Credit Agreement.
At December 31, 2024, we had $25.0 million available under this facility. At December 31, 2024, there was no outstanding balance under the Credit Agreement.
LIQUIDITY AND CAPITAL RESOURCES Our principal use of cash is to pay for operating expenses and costs, including volume incentives, inventory and raw material purchases, capital assets and funding of international expansion. As of December 31, 2023, working capital was $89.1 million, compared to $83.9 million as of December 31, 2022.
LIQUIDITY AND CAPITAL RESOURCES Our principal use of cash is to pay for operating expenses and costs, including volume incentives, inventory and raw material purchases, capital assets and funding of international expansion. As of December 31, 2024, working capital was $94.9 million, compared to $89.1 million as of December 31, 2023.
Year Ended December 31, 2022, as Compared to the Year Ended December 31, 2021 For a discussion regarding our financial condition and results of operations for fiscal 2022 compared to fiscal 2021, see Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 16, 2023.
Year Ended December 31, 2023, as Compared to the Year Ended December 31, 2022 For a discussion regarding our financial condition and results of operations for fiscal 2023 compared to fiscal 2022, see Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 12, 2024.
We will continue monitoring the social, political, regulatory and economic environment in Ukraine and Russia, and will consider further actions as appropriate. Net sales related to Eastern Europe for the years ended December 31, 2023 and 2022, were $54.3 million and $53.3 million, respectively.
We will continue monitoring the social, political, regulatory and economic environment in Ukraine and Russia and will consider further actions as appropriate. Net sales related to Eastern Europe for the years ended December 31, 2024 and 2023, were $54.8 million and $54.3 million, respectively.
Volume incentives vary slightly, on a percentage basis, by product due to pricing policies and commission plans in place in the various operations. We do not pay volume incentives in China, instead we pay independent service fees, which are included in selling, general and administrative expenses.
Volume incentives vary slightly, on a percentage basis, by product due to pricing policies and commission plans in place in our various geographies. We do not pay volume incentives in China, instead we pay independent service fees which are included in selling, general and administrative expenses.
As of December 31, 2023 and 2022, we had recorded valuation allowances of $18.5 million and $18.0 million, respectively, as offsets to deferred tax assets. At December 31, 2023, foreign subsidiaries had unused operating loss carryovers for tax purposes of approximately $4.4 million.
As of December 31, 2024 and 2023, we had recorded valuation allowances of $18.9 million and $18.5 million, respectively, as offsets to deferred tax assets. At December 31, 2024, foreign subsidiaries had unused operating loss carryovers for tax purposes of approximately $5.4 million.
Because of the high degree of uncertainty regarding the timing of future cash outflows associated with the product liability obligations, we are unable to estimate the years in which cash settlement may occur. (2) At December 31, 2023, there were $0.7 million of liabilities. We provide a nonqualified deferred compensation plan for our officers and certain key employees.
Because of the high degree of uncertainty regarding the timing of future cash outflows associated with the product liability obligations, we are unable to estimate the years in which cash settlement may occur. (2) At December 31, 2024, there were $0.9 million of liabilities. We provide a non-qualified deferred compensation plan for our officers and certain key employees.
In our Japan market, net sales increased approximately $2.1 million, or 5.5 percent, for the year ended December 31, 2023, compared to 2022. Fluctuations in foreign exchange rates had a $3.0 million unfavorable impact on net sales for the year ended December 31, 2023.
In our Japan market, net sales increased approximately $2.9 million, or 7.1 percent, for the year ended December 31, 2024, compared to 2023. Fluctuations in foreign exchange rates had a $3.5 million unfavorable impact on net sales for the year ended December 31, 2024.
Latin America and Other net sales decreased approximately 1.1 percent (or 3.5 percent in local currencies) compared to 2022. The strengthening of the U.S. dollar versus the local currencies, primarily in our Asian markets, resulted in an approximate 1.8 percent, or $7.5 million, decrease of our net sales during the year ended December 31, 2023.
Latin America and Other net sales decreased approximately 1.2 percent (or 0.9 percent in local currencies) compared to 2023. The strengthening of the U.S. dollar versus the local currencies, primarily in our Asian markets, resulted in an approximate 1.8 percent, or $7.7 million, decrease of our net sales during the year ended December 31, 2024.
Asia Net sales related to Asia for the year ended December 31, 2023, were $201.3 million compared to $186.3 million for 2022, an increase of 8.0 percent. In local currency, net sales increased by 12.7 percent compared to 2022. Fluctuations in foreign exchange rates had an $8.8 million unfavorable impact on net sales for the year ended December 31, 2023.
Asia Net sales related to Asia for the year ended December 31, 2024, were $207.8 million compared to $201.3 million for 2023, an increase of 3.3 percent. In local currency, net sales increased by 7.5 percent compared to 2023. Fluctuations in foreign exchange rates had an $8.5 million unfavorable impact on net sales for the year ended December 31, 2024.
The components of this calculation were: Components of U.S. tax impact of foreign operations 2023 Foreign tax credits (26.7) % Foreign tax rate differentials 0.4 Foreign withholding taxes 4.5 Transfer pricing adjustment 1.4 Impact of Subpart F 0.7 Impact of GILTI (2.4) Impact of FDII (3.2) Total (25.3) % Changes to the effective rate due to impact of foreign tax credits, foreign tax rate differentials, foreign withholding taxes, transfer pricing, Subpart F, GILTI and FDII are expected to be recurring; however, depending on various factors, the changes may be favorable or unfavorable for a particular period.
The components of this calculation were: Components of U.S. tax impact of foreign operations 2024 Foreign tax credits 1.0 % Foreign tax rate differentials 0.1 Foreign withholding taxes 3.9 Transfer pricing adjustment 0.8 Impact of Subpart F — Impact of GILTI (0.8) Impact of FDII (14.2) Total (9.2) % Changes to the effective rate due to impact of foreign tax credits, foreign tax rate differentials, foreign withholding taxes, transfer pricing, Subpart F, GILTI and FDII are expected to be recurring; however, depending on various factors, the changes may be favorable or unfavorable for a particular period.
We are a Utah corporation with our principal place of business in Lehi, Utah, and sell our products to a sales force of independent consultants who use the products themselves or resell them to consumers. Our independent consultants market and sell our products to customers and sponsor other independent consultants who also market our products to customers.
We are a Utah corporation with our principal place of business in Lehi, Utah, and sell our products directly to customers and to a sales force of independent consultants who resell our products to consumers. Our independent consultants market and sell our products to customers and sponsor other independent consultants who also market our products to customers.
Our consultants in our Eastern Europe market within our Europe business segment that includes Russia, Ukraine, Belarus and other Common Independent States in the region, continue to operate their independent businesses, albeit at a reduced level than prior to the start of the conflict.
Our consultants in our Eastern Europe market, a market within our Europe business segment that includes Russia, Ukraine, Belarus and other Common Independent States in the region, continue to operate their independent businesses, albeit at a reduced level than prior to the start of the conflict. We expect that this will continue to impact our business for the foreseeable future.
The net operating losses will expire at various dates from 2024 through 2034, with the exception of those in some foreign jurisdictions where there is no expiration. As of December 31, 2023, we had approximately $16.7 million of foreign tax and withholding credits.
The net operating losses will expire at various dates from 2025 through 2035, with the exception of those in some foreign jurisdictions where there is no expiration. As of December 31, 2024, we had approximately $12.4 million of foreign tax and withholding credits.
Fluctuations in foreign exchange rates had a $0.4 million unfavorable impact on net sales for the year ended December 31, 2023. Excluding the impact of fluctuations in foreign exchange rates, local currency net sales in North America increased by 5.2 percent from 2022.
Fluctuations in foreign exchange rates had a $0.2 million unfavorable impact on net sales for the year ended December 31, 2024. Excluding the impact of fluctuations in foreign exchange rates, local currency net sales in North America decreased by 0.6 percent from 2023.
The effective rate for 2023 differed from the federal statutory rate of 21.0 percent primarily due to the following: • Adjustments to valuation allowances increased the effective rate by 5.4 percent in 2023.
The effective rate for 2024 differed from the federal statutory rate of 21.0 percent primarily due to the following: • Adjustments to valuation allowances increased the effective rate by 6.0 percent in 2024.
Latin America and Other Net sales related to Latin America and Other markets for the year ended December 31, 2023, were $23.2 million, compared to $23.4 million for 2022, a decrease of 1.1 percent. Fluctuations in foreign exchange rates had a $0.6 million favorable impact on net sales for the year ended December 31, 2023.
Latin America and Other Net sales related to Latin America and Other markets for the year ended December 31, 2024, were $22.9 million, compared to $23.2 million for 2023, a decrease of 1.2 percent. Fluctuations in foreign exchange rates had a $0.1 million unfavorable impact on net sales for the year ended December 31, 2024.
The increase was related to product sales improvements in our Asia, Europe, and North America operating segments. Excluding the unfavorable impact of foreign currency exchange rate fluctuations, consolidated net sales for the year ended December 31, 2023 would have increased by 7.3 percent from 2022.
The increase was related to product sales increases in our Asia and Europe operating segments. Excluding the impact of foreign currency exchange rate fluctuations, consolidated net sales for the year ended December 31, 2024 would have increased by 3.8 percent from 2023.
Excluding the impact of fluctuations in foreign exchange rates, local currency net sales in Latin America and Other decreased by 3.5 percent from 2022.
Excluding the impact of fluctuations in foreign exchange rates, local currency net sales in Latin America and Other decreased by 0.9 percent from 2023.
Selling, general and administrative expenses increased by $13.9 million to $167.1 million for the year ended December 31, 2023. Selling, general and administrative expenses were 37.5 percent and 36.3 percent of net sales for the years ended December 31, 2023 and 2022, respectively.
Selling, general and administrative expenses decreased by $3.1 million to $164.0 million for the year ended December 31, 2024. Selling, general and administrative expenses were 36.1 percent and 37.5 percent of net sales for the years ended December 31, 2024 and 2023, respectively.
Likewise, we expect foreign markets with functional currencies other than the U.S. dollar will continue to represent a substantial portion of our overall sales and related operating expenses.
As an international business, we have significant sales and costs denominated in currencies other than the U.S. Dollar. We expect foreign markets with functional currencies other than the U.S. Dollar will continue to represent a substantial portion of our overall sales and related operating expenses.
Operating income related to Russia and Other for the years ended December 31, 2023 and 2022, were $3.1 million and $2.9 million, respectively, prior to the charges noted above. As of December 31, 2023, Russia and Other had assets of $7.4 million, net of working capital reserves related to inventories.
Operating income related to Eastern Europe for the years ended December 31, 2024 and 2023, were $4.2 million and $3.1 million, respectively. As of December 31, 2024, Eastern Europe had assets of $7.2 million, net of working capital reserves related to inventories.
Notable activity in the following markets contributed to the results of Asia: In our South Korea market, net sales decreased approximately $5.1 million, or 9.3 percent, for the year ended December 31, 2023, compared to 2022. Fluctuations in foreign exchange rates had a $0.7 million unfavorable impact on net sales for the year ended December 31, 2023.
Notable activity in the following markets contributed to the results of Asia: In our Taiwan market, net sales increased approximately $8.9 million, or 14.4 percent, for the year ended December 31, 2024, compared to 2023. Fluctuations in foreign exchange rates had a $2.2 million unfavorable impact on net sales for the year ended December 31, 2024.
We maintain a revolving credit agreement with Bank of America, N.A (the “Credit Agreement”), as well as a credit agreement with Banc of America Leasing and Capital, LLC (the "Capital Credit Agreement"). At December 31, 2023, there was no outstanding balance under the Credit Agreement.
At December 31, 2024, the remaining balance available for repurchases under the program was $8.8 million. We maintain a revolving credit agreement with Bank of America, N.A (the “Credit Agreement”), as well as a credit agreement with Banc of America Leasing and Capital, LLC (the "Capital Credit Agreement").
Asia net sales increased approximately 8.0 percent (or 12.7 percent in local currencies) compared to 2022. Europe net sales increased approximately 2.7 percent (or 1.3 percent in local currencies) compared to 2022. North America net sales increased approximately 4.9 percent (or 5.2 percent in local currencies) compared to 2022.
Asia net sales increased approximately 3.3 percent (or 7.5 percent in local currencies) compared to 2023. Europe net sales increased approximately 4.6 percent (or 3.3 percent in local currencies) compared to 2023. North America net sales decreased approximately 0.7 percent (or 0.6 percent in local currencies) compared to 2023.
Our debt obligations are discussed in greater detail in Note 7, “Revolving Credit Facility and Other Obligations,” to our Condensed Consolidated Financial Statements in Part II, Item 8 of this report.
At December 31, 2024, there were no outstanding balances under the Credit Agreement or the Capital Credit Agreement. Our debt obligations are discussed in greater detail in Note 7, “Revolving Credit Facility and Other Obligations,” to our Condensed Consolidated Financial Statements in Part II, Item 8 of this report.
Of the $16.7 million credits, $16.4 million are foreign tax credits, many of which expire in 2024 and a majority of which are offset by valuation allowances. The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in a multitude of jurisdictions across our global operations.
Of the $12.4 million credits, $12.1 million are foreign tax credits, many of which we do not expect to use before expiration and are offset by a valuation allowance. The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in a multitude of jurisdictions across our global operations.
Accordingly, changes in foreign currency exchange rates could materially affect sales and costs or the comparability of sales and costs from period to period as a result of translating foreign markets financial statements into our reporting currency.
Accordingly, changes in foreign currency exchange rates could materially affect sales and costs or the comparability of sales and costs from period to period as a result of translating foreign markets' financial statements into our reporting currency. Eastern Europe On February 24, 2022, Russian forces launched significant military action against Ukraine.
Net Sales by Operating Segment 2023 2022 Percent Change Impact of Currency Exchange Percent Change Excluding Impact of Currency Asia $ 201,251 $ 186,292 8.0 % $ (8,773) 12.7 % Europe 81,101 78,991 2.7 % 1,083 1.3 % North America 139,804 133,214 4.9 % (397) 5.2 % Latin America and Other 23,164 23,413 (1.1) % 575 (3.5) % $ 445,320 $ 421,910 5.5 % $ (7,512) 7.3 % Consolidated net sales for the year ended December 31, 2023, were $445.3 million compared to $421.9 million in 2022, or an increase of approximately 5.5 percent.
Net Sales by Operating Segment 2024 2023 Percent Change Impact of Currency Exchange Percent Change Excluding Impact of Currency Asia $ 207,794 $ 201,251 3.3 % $ (8,548) 7.5 % Europe 84,837 81,101 4.6 % 1,085 3.3 % North America 138,849 139,804 (0.7) % (162) (0.6) % Latin America and Other 22,884 23,164 (1.2) % (70) (0.9) % $ 454,364 $ 445,320 2.0 % $ (7,695) 3.8 % Consolidated net sales for the year ended December 31, 2024, were $454.4 million compared to $445.3 million in 2023, or an increase of approximately 2.0 percent.
Other income (loss), for the year ended December 31, 2023 primarily consisted of foreign exchange gains and losses as a result of net changes in foreign currencies primarily in Asia. Income Taxes Our effective tax rate was 18.7 percent for 2023 compared to 96.4 percent for 2022.
Other income (loss), for the year ended December 31, 2024 primarily consisted of foreign exchange losses in Latin America and Europe, partially offset by foreign exchange gains in Asia, that resulted from net changes in foreign currencies. 28 Table of Contents Income Taxes Our effective tax rate was 57.2 percent for 2024 compared to 18.7 percent for 2023.
Included was the effect of recording a valuation allowance on foreign tax credits which are not expected to be utilized before expiration along with the impact of current year foreign losses in foreign affiliates that currently do not provide tax benefit. • Adjustments related to operations in foreign countries which are treated as a branch for US tax purposes increased the effective tax rate by 13.8 percent in 2023. • Cumulative unfavorable adjustments related to foreign operations increased the tax rate by 4.8 percent in 2023.
Included is the effect of recording a valuation allowance on foreign tax credits which are not expected to be utilized before expiration along with the impact of current year foreign losses of foreign affiliates that currently do not provide tax benefit.
Our operations have been, and may continue to be, adversely impacted by inflation, primarily from higher costs of raw materials, labor, production, distribution and transportation costs. 2023 Performance In 2023, we experienced an increase in our consolidated net sales of 5.5 percent (or 7.3 percent in local currencies) compared to 2022.
Our operations have been, and may continue to be, adversely impacted by inflation, primarily from higher costs of raw materials, labor, production, distribution and transportation costs.
The functional currency for many of these markets is the U.S. dollar which reduces the effect from foreign currency fluctuations. Fluctuations in foreign exchange rates had a $1.1 million favorable impact on net sales for the year ended December 31, 2023.
Fluctuations in foreign exchange rates had a $1.1 million favorable impact on net sales for the year ended December 31, 2024.
Cost of sales increased $2.0 million during 2023, compared to the same period in 2022, and as a percentage of net sales were 27.9 percent and 29.0 percent for 2023 and 2022, respectively.
Cost of sales increased $5.5 million during 2024, compared to the same period in 2023, and as a percentage of net sales were 28.5 percent and 27.9 percent for 2024 and 2023, respectively. The increase in cost of sales percentage is primarily due to inflation and unfavorable foreign exchange which more than offset our savings initiatives.
These adjustments relate to foreign items that are treated differently for tax purposes than they are for financial reporting purposes. • Favorable adjustments from filing the prior year tax return decreased the rate 7.9 percent in 2023.
These adjustments relate to foreign items that are treated differently for tax purposes than they are for financial reporting purposes. • Adjustments relating to the U.S. tax impact of foreign operations decreased the effective tax rate by 9.2 percentage points in 2024.
For the year ended December 31, 2023, we used cash to repurchase 424,000 shares of our common stock under the share repurchase program for $6.4 million. At December 31, 2023, the remaining balance available for repurchases under the program was $17.6 million.
Financing Activities For the year ended December 31, 2024, financing activities used $9.9 million in cash, compared to $8.0 million in cash used for the same period in 2023. For the year ended December 31, 2024, we used cash to repurchase 540,000 shares of our common stock under the share repurchase program for $8.9 million.
In the United States, net sales increased $6.4 million, or 5.2 percent, for the year ended December 31, 2023, compared to 2022. The increase was primarily due to growth in our digital channel, along with an increase in new customers.
In the United States, net sales decreased $2.0 million, or 1.6 percent, for the year ended December 31, 2024, compared to 2023. The decrease was primarily due to lower activity rates.
Cost of Sales Cost of sales as a percent of net sales decreased to 27.9 percent in 2023, compared to 29.0 percent in 2022. The decrease in cost of sales percentage is primarily due to improvements in market mix, sales price increases, and gross margin improvement initiatives, partially offset by increases related to inflation and unfavorable foreign currency exchange.
Cost of Sales Cost of sales as a percent of net sales increased to 28.5 percent in 2024, compared to 27.9 percent in 2023. The increase in cost of sales percentage is primarily due to inflation and unfavorable foreign exchange which more than offset our savings initiatives.
In addition, other things such as a prolonged economic downturn, a decrease in demand for our products, an unfavorable settlement of our unrecognized tax positions or non-income tax contingencies could adversely affect our long-term liquidity. 30 Table of Contents CONTRACTUAL OBLIGATIONS The following table summarizes information about contractual obligations as of December 31, 2023 ( in thousands ): Total Less than 1 year 1-3 years 3-5 years After 5 years Operating lease obligations $ 16,555 $ 5,341 $ 6,241 $ 4,456 $ 517 Self-insurance reserves (1) 544 544 — — Other long-term liabilities reflected on the balance sheet (2) 747 — — — 747 Unrecognized tax benefits(3) 312 — — — 312 Revolving credit facility (4) — — — — — Total $ 18,158 $ 5,885 $ 6,241 $ 4,456 $ 1,576 _______________________________________ (1) At December 31, 2023, there were $0.8 million of liabilities.
CONTRACTUAL OBLIGATIONS The following table summarizes information about contractual obligations as of December 31, 2024 ( in thousands ): Total Less than 1 year 1-3 years 3-5 years After 5 years Operating lease obligations $ 15,586 $ 4,519 $ 7,580 $ 3,487 $ — Self-insurance reserves (1) 948 948 — — Other long-term liabilities reflected on the balance sheet (2) 915 — — — 915 Unrecognized tax benefits(3) 628 — — — 628 Revolving credit facility (4) — — — — — Total $ 18,077 $ 5,467 $ 7,580 $ 3,487 $ 1,543 _______________________________________ (1) At December 31, 2024, there were $1.2 million of liabilities.
More broadly, there could be additional negative impacts to our net sales, earnings and cash flows should the situation escalate beyond its current scope, including, among other potential impacts, economic recessions in certain neighboring countries or globally due to inflationary pressures and supply chain cost increases or the geographic proximity of the war relative to the rest of Europe.
More broadly, there could be additional negative impacts to our net sales, earnings and cash flows should the situation escalate beyond its current scope, including, among other potential impacts, economic recessions in certain neighboring countries. 23 Table of Contents In addition, in November 2024 we began an internal investigation regarding our past compliance with relevant U.S. trade controls and made voluntary disclosures of apparent trade controls violations to the U.S.
For the years ended December 31, 2023 and 2022, these amounts were $10.5 million and $7.6 million, respectively. Financing Activities For the year ended December 31, 2023, financing activities used $8.0 million in cash, compared to $16.2 million in cash used for the same period in 2022.
Investing Activities Cash used in investing activities includes cash paid for capital expenditures related to the purchase of equipment, computer systems and software. For the years ended December 31, 2024 and 2023, these amounts were $11.0 million and $10.5 million, respectively.
In our Taiwan market, net sales increased approximately $13.2 million, or 27.3 percent, for the year ended December 31, 2023, compared to 2022. Fluctuations in foreign exchange rates had a $2.9 million unfavorable impact on net sales for the year ended December 31, 2023.
Fluctuations in foreign exchange rates had a $2.2 million unfavorable impact on net sales for the year ended December 31, 2024. In local currency, net sales increased 7.5 percent compared to 2023. We attribute the growth in net sales primarily to improved customer acquisition that was bolstered by higher average order values.
Part of the decrease also relates to prior-year inventory valuation reserves taken as a result of the conflict between Russia and Ukraine. Volume Incentives Volume incentives as a percent of net sales decreased to 30.4 percent in 2023, compared to 30.9 percent in 2022. These payments are designed to provide incentives for reaching higher sales levels.
Volume Incentives Volume incentives as a percent of net sales increased to 30.9 percent in 2024, compared to 30.4 percent in 2023. The increase was primarily due to changes in market mix and the timing of promotional incentives. These payments are designed to provide incentives for reaching certain sales levels.
In our China market, net sales increased approximately $3.4 million, or 8.6 percent, for the year ended December 31, 2023, compared to 2022. Fluctuations in foreign exchange rates had a $2.0 million unfavorable impact on net sales for the year ended December 31, 2023.
Fluctuations in foreign exchange rates had a $0.5 million unfavorable impact on net sales for the year ended December 31, 2024. In local currency, net sales decreased 15.0 percent for the year ended December 31, 2024, compared to 2023. The decrease in net sales was primarily the result of challenging macroeconomic factors and lower consultant activity.
The increase in net sales was primarily the result of our digitally-focused, livestream business model, combined with strong execution and field activation. 27 Table of Contents Europe Net sales related to Europe were $81.1 million for the year ended December 31, 2023, compared to $79.0 million for 2022, an increase of 2.7 percent.
We attribute the increase in net sales in local currency primarily due to the increased focus on our field activation initiatives. 27 Table of Contents North America Net sales related to North America for the year ended December 31, 2024, were $138.8 million, compared to $139.8 million for 2023, a decrease of 0.7 percent.
In local currency, net sales increased 13.3 percent for the year ended December 31, 2023, compared to 2022. We attribute the growth in net sales primarily to effective execution of fundamentals within our sales force with a strong focus on product resale and leadership development in our key demographic.
In local currency, net sales increased 17.9 percent for the year ended December 31, 2024, compared to 2023. We attribute the growth in net sales primarily to strong growth in consultant activity and total orders. In our South Korea market, net sales increased approximately $1.5 million, or 3.0 percent, for the year ended December 31, 2024, compared to 2023.
In local currency, net sales increased 33.3 percent for the year ended December 31, 2023, compared to 2022.
In local currency, net sales increased 15.6 percent for the year ended December 31, 2024, compared to 2023. The growth in net sales was primarily the result of improved consultant activity and order growth. In our China market, net sales decreased approximately $7.0 million, or 16.3 percent, for the year ended December 31, 2024, compared to 2023.
Part of the decrease also relates to prior-year inventory valuation reserves taken as a result of the conflict between Russia and Ukraine. 23 Table of Contents Selling, general and administrative expenses increased $13.9 million during 2023, and as a percentage of net sales were 37.5 percent and 36.3 percent for 2023 and 2022, respectively.
In absolute terms, selling, general and administrative expenses decreased $3.1 million during 2024, and as a percentage of net sales were 36.1 percent and 37.5 percent for 2024 and 2023, respectively. The decrease was primarily related to the streamlining of our global overhead expenses and reduced service fees due to China’s lower net sales.
Operating cash flows increased primarily due to improved net income, the timing of payments for accrued liabilities, accounts payable, reduced inventory purchases, and timing of receipts of accounts receivable. Investing Activities Cash used in investing activities includes cash paid for capital expenditures related to the purchase of equipment, computer systems and software.
Operating cash flows decreased primarily due to the timing of payments for accrued liabilities, income taxes payable, accrued volume incentives and service fees, lease liabilities and timing of receipts of accounts receivable, partially offset by a reduction in inventories.
See further discussion in Note 15, “Synergy Japan Loss,” to our Condensed Consolidated Financial Statements in Item 8, Part II of this report. Other Income (Loss), Net Other income (loss), net, for the years ended December 31, 2023 and 2022, was gains of $1.5 million and losses of $1.0 million, respectively.
The dollar decrease was primarily related to the streamlining of our global overhead expenses and reduced service fees due to China's lower net sales. Other Income (Loss), Net Other income (loss), net, for the years ended December 31, 2024 and 2023, was losses of $1.7 million and gains of $1.5 million, respectively.
Removed
Our sales are highly dependent upon the number and productivity of our independent consultants. Growth in sales volume generally requires an increase in the productivity of our independent consultants and/or growth in the total number of independent consultants.
Added
Because a significant amount of revenue is generated through the sales of our independent consultants, our revenue can be impacted by the number and productivity of our independent consultants.
Removed
We seek to motivate and provide incentives to our independent consultants by offering high quality products and providing independent consultants with product support, training seminars, sales conventions, travel programs and financial incentives. Eastern Europe On February 24, 2022, Russian forces launched significant military action against Ukraine.
Added
We seek to motivate and provide incentives to our independent consultants by offering high quality products, product support, training seminars and financial incentives, among other considerations. 2024 Performance In 2024, we experienced an increase in our consolidated net sales of 2.0 percent (or 3.8 percent in local currencies) compared to 2023.
Removed
For the years ended December 31, 2023 and 2022, we have recorded pretax charges of $0 and $1.0 million, respectively, primarily related to the impairment of inventory. We expect that this will continue to impact our business for the foreseeable future.
Added
Department of Commerce's Bureau of Industry and Security (“BIS”). We estimate that such potential violations being investigated represented less than one percent of our net revenue in each of our last three fiscal years. An unfavorable outcome of this investigation may include fines or penalties imposed in response to our voluntary disclosures.
Removed
Inflation Like many other companies, we are facing significant inflationary pressures in the global economy.
Added
While we believe the amount of any fines or penalties would not be material to our financial condition and results of operation, we are unable to predict the outcome or to reasonably estimate the time it may take to resolve these matters. Inflation Like many other companies, we are facing significant inflationary pressures in the global economy.
Removed
The decrease in cost of sales percentage is primarily due to improvements in market mix, sales price increases, and gross margin improvement initiatives, partially offset by increases related to inflation and unfavorable foreign currency exchange.
Added
Europe Net sales related to Europe were $84.8 million for the year ended December 31, 2024, compared to $81.1 million for 2023, an increase of 4.6 percent. The functional currency for many of these markets is the U.S. dollar which reduces the effect from foreign currency fluctuations.
Removed
The increase was primarily related to compensation, marketing, and variable costs as a result of sales growth. As an international business, we have significant sales and costs denominated in currencies other than the U.S. dollar. Sales in international markets denominated in foreign currencies are expected to continue to represent a substantial portion of our sales.
Added
The increase in the effective rate from 2023 to 2024 was primarily attributable to taxes paid in foreign jurisdictions. We expect to be limited in our ability to offset these foreign taxes with U.S. foreign tax credits.
Removed
In local currency, net sales decreased 8.0 percent compared to 2022. The decrease in net sales was primarily the result of a slower than anticipated response to our field activation initiatives, combined with inflationary and other macroeconomic factors.
Added
These impacts are partially offset by a release of valuation allowance on foreign tax credits which expired at the end of the year. • Withholding taxes on royalties related to foreign operations increased the tax rate by 29.3 percent in 2024.
Removed
We attribute the growth in net sales primarily to effective execution of fundamentals within our sales force with a strong focus on leadership development and incentives intended to stimulate sales activity, as well as the opening of our new sales center in Kaohsiung, Taiwan.
Added
These are partially offset by foreign tax credits. • Cumulative unfavorable adjustments related to foreign operations increased the tax rate by 5.2 percent in 2024.
Removed
In local currency, net sales increased 13.7 percent for the year ended December 31, 2023, compared to 2022.
Added
Included in this amount is the impact of foreign tax credits which expired at the end of the year.
Removed
Net sales increased primarily as a result of customers' relative acclimation to the conflict between Russia and Ukraine, as well as strong field activation, especially in Central Europe. North America Net sales related to North America for the year ended December 31, 2023, were $139.8 million, compared to $133.2 million for 2022, an increase of 4.9 percent.
Added
In addition, other things such as a prolonged economic downturn, a decrease in demand for our products, an unfavorable settlement of our unrecognized tax positions or non-income tax contingencies could adversely affect our long-term liquidity.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeInventory purchases are transacted primarily in U.S. dollars from vendors located in the United States. The local currency of each international subsidiary is generally the functional currency. We conduct business in multiple currencies with exchange rates that are not on a one-to-one relationship with the U.S. dollar.
Biggest changeForeign Currency Risk During the year ended December 31, 2024, approximately 71.8 percent of our net sales and approximately 62.5 percent of our operating 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 generally the functional currency.
Foreign currency transaction gains and losses are included in other income (expense) in the consolidated statements of operations. The functional currency in highly inflationary economies is the U.S. dollar, and transactions denominated in the local currency are re-measured as if the functional currency were the U.S. dollar.
Foreign currency transaction gains and losses are included in other income (expense) in the consolidated statements of income. The functional currency in highly inflationary economies is the U.S. dollar, and transactions denominated in the local currency are re-measured as if the functional currency were the U.S. dollar.
It is noted that individual net sales, cost and expense components and operating income were equally sensitive to increases in the strength of the U.S. dollar against every other fluctuating currency in which we conduct business. Exchange rate sensitivity for the year ended December 31, 2023 ( dollar amounts in thousands ): With Strengthening of U.S.
It is noted that individual net sales, cost and expense components and operating income were equally sensitive to increases in the strength of the U.S. dollar against every other fluctuating currency in which we conduct business. Exchange rate sensitivity for the year ended December 31, 2024 ( dollar amounts in thousands ): With Strengthening of U.S.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk We conduct business in several countries and intend to grow our international operations. Net sales, 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.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk We conduct business in several countries and intend to grow our international operations. Net sales, operating income and net income are affected by fluctuations in currency exchange rates, interest rates and other uncertainties inherent in doing business and selling products in more than one currency.
The respective spot exchange rate for each such local currency meeting the foregoing thresholds is provided in the table as well. Translation of Cash Amounts Denominated in Local Currency as of December 31, 2023 ( dollar amounts in thousands ): Translated into U.S. Dollars At Spot Exchange Rate per One U.S.
The respective spot exchange rate for each such local currency meeting the foregoing thresholds is provided in the table as well. Translation of Cash Amounts Denominated in Local Currency as of December 31, 2024 ( dollar amounts in thousands ): Translated into U.S. Dollars At Spot Exchange Rate per One U.S.
None of our liabilities that are denominated in a local currency other than the U.S. dollar and that are subject to exchange rate risk represent a significant concentration upon translation into U.S. dollars. We use the spot exchange rate for translating balance sheet items from local currencies into our reporting currency.
None of our liabilities that are denominated in a local currency other than the U.S. dollar and that are subject to exchange rate risk represent a significant concentration upon translation into U.S. dollars. We use the spot exchange rate for 32 Table of Contents translating balance sheet items from local currencies into our reporting currency.
During the years ended December 31, 2023 and 2022, we did not operate in any countries considered to be highly inflationary. Interest Rate Risk On December 31, 2023, we did not have any available for sale investments. On December 31, 2023, we had no outstanding balance on our revolving credit line. 34 Table of Contents
During the years ended December 31, 2024 and 2023, we did not operate in any countries considered to be highly inflationary. Interest Rate Risk On December 31, 2024, we did not have any available for sale investments. On December 31, 2024, we had no outstanding balance on our revolving credit line. 33 Table of Contents
The re-measurement of local currencies into U.S. dollars creates translation adjustments, which are included in the consolidated statements of operations.
The re-measurement of local currencies into U.S. dollars creates translation adjustments, which are included in the consolidated statements of income.
Year ended December 31, 2023 2022 Canada (Dollar) 1.3 1.3 China (Yuan Renminbi) 7.1 6.7 European Markets (Euro) 0.9 0.9 Japan (Yen) 140.1 130.5 South Korea (Won) 1,305.6 1,287.3 Poland (Zloty) 4.2 4.4 Taiwan (Dollar) 31.1 29.7 33 Table of Contents The local currency of the foreign subsidiaries is used as the functional currency, except for where our operations are served by a U.S. based subsidiary (for example, Russia and Ukraine).
Year ended December 31, 2024 2023 Canada (Dollar) 1.4 1.3 China (Yuan Renminbi) 7.2 7.1 European Markets (Euro) 0.9 0.9 Japan (Yen) 151.3 140.1 South Korea (Won) 1,362.6 1,305.6 Poland (Zloty) 4.0 4.2 Taiwan (Dollar) 32.1 31.1 The local currency of the foreign subsidiaries is used as the functional currency, except for where our operations are served by a U.S. based subsidiary (for example, Russia and Ukraine).
We used the annual average exchange rate for translating items from the statement of operations from local currencies into our reporting currency.
We used the annual average exchange rate for translating items from the statements of income from local currencies into our reporting currency.
All revenues and expenses are translated at average exchange rates for the periods reported. Therefore, our operating results will be positively or negatively affected by a weakening or strengthening of the U.S. dollar in relation to another fluctuating currency.
We conduct business in multiple currencies with exchange rates that are not on a one-to-one relationship with the U.S. dollar. All revenues and expenses are translated at average exchange rates for the periods reported. Therefore, our operating results will be positively or negatively affected by a weakening or strengthening of the U.S. dollar in relation to another fluctuating currency.
The sensitivity of our financial assets and liabilities, taken by balance sheet line items, is somewhat less than the sensitivity of our operating income to increases in the strength of the U.S. dollar in relation to other fluctuating currencies in which we conduct business. 32 Table of Contents Exchange Rate Sensitivity of financial assets and liabilities as of December 31, 2023 ( dollar amounts in thousands ): With Strengthening of U.S.
The sensitivity of our financial assets and liabilities, taken by balance sheet line items, is somewhat less than the sensitivity of our operating income to increases in the strength of the U.S. dollar in relation to other fluctuating currencies in which we conduct business.
The following table sets forth a composite sensitivity analysis of net sales, costs and expenses and operating income in connection with the strengthening of the U.S. dollar (our reporting currency) by 10%, 15%, and 25% against every other fluctuating functional currency in which we conduct business.
Additional discussion of the impact on the effect of currency fluctuations has been included in Management’s Discussion and Analysis included in Part II, Item 7 of this report. 31 Table of Contents The following table sets forth a composite sensitivity analysis of net sales, costs and expenses and operating income in connection with the strengthening of the U.S. dollar (our reporting currency) by 10%, 15% and 25% against every other fluctuating functional currency in which we conduct business.
Dollar Cash and Cash Equivalents China (Yuan Renminbi) $ 28,513 7.1 South Korea (Won) 5,662 1,294.5 Japan (Yen) 4,732 141.0 Canada (Dollar) 2,501 1.3 Poland (Zloty) 4,432 3.9 Other 16,643 Varies Total foreign denominated cash and cash equivalents 62,483 U.S. dollars held by foreign subsidiaries 4,565 Total cash and cash equivalents held by foreign subsidiaries $ 67,048 Finally, the following table sets forth the annual weighted-average of fluctuating currency exchange rates of each of the local currencies per one U.S. dollar for each of the local currencies in which annualized net sales would exceed $10.0 million during any of the two periods presented.
Dollar Cash and Cash Equivalents China (Yuan Renminbi) $ 29,314 7.3 Taiwan (Dollar) 11,421 32.8 South Korea (Won) 6,678 1,472.4 Japan (Yen) 5,842 157.5 Poland (Zloty) 3,893 4.1 Canada (Dollar) 2,664 1.4 Other 8,219 Varies Total foreign denominated cash and cash equivalents 68,031 U.S. dollars held by foreign subsidiaries 3,429 Total cash and cash equivalents held by foreign subsidiaries $ 71,460 Finally, the following table sets forth the annual weighted-average of fluctuating currency exchange rates of each of the local currencies per one U.S. dollar for each of the local currencies in which annualized net sales would exceed $10.0 million during any of the two periods presented.
In addition, our operations are exposed to risks associated with changes in social, political and economic conditions inherent in international operations, including changes in the laws and policies that govern international investment in countries where we have operations, as well as, to a lesser extent, changes in U.S. laws and regulations relating to international trade and investment. 31 Table of Contents Foreign Currency Risk During the year ended December 31, 2023, approximately 71.0 percent of our net sales and approximately 63.6 percent of our operating expenses were realized outside of the United States.
In addition, our operations are exposed to risks associated with changes in social, political and economic conditions inherent in international operations, including changes in the laws and policies that govern international investment in countries where we have operations, as well as, to a lesser extent, changes in U.S. laws and regulations relating to international trade and investment.
Dollar by: 10% 15% 25% (Loss) ($) (Loss) (%) (Loss) ($) (Loss) (%) (Loss) ($) (Loss) (%) Financial Assets Included in Current Assets Subject to Exchange Rate Risk Cash and cash equivalents $ 82,373 $ (5,680) (6.9) % $ (8,150) (9.9) % $ (12,497) (15.2) % Accounts receivable, net 8,827 (546) (6.2) % (784) (8.9) % (1,202) (13.6) % Financial Liabilities Included in Current Liabilities Subject to Exchange Rate Risk Accounts payable 7,910 (321) (4.1) % (460) (5.8) % (706) (8.9) % Net Financial Assets Subject to Exchange Rate Risk $ 83,290 $ (5,905) (7.1) % $ (8,474) (10.2) % $ (12,993) (15.6) % The following table sets forth the local currencies other than the U.S. dollar in which our assets that are subject to exchange rate risk were denominated as of December 31, 2023, and represent a significant concentration upon translation into U.S. dollars.
Dollar by: 10% 15% 25% (Loss) ($) (Loss) (%) (Loss) ($) (Loss) (%) (Loss) ($) (Loss) (%) Financial Assets Included in Current Assets Subject to Exchange Rate Risk Cash and cash equivalents $ 84,700 $ (6,185) (7.3) % $ (8,874) (10.5) % $ (13,606) (16.1) % Accounts receivable, net 9,477 (508) (5.4) % (729) (7.7) % (1,118) (11.8) % Financial Liabilities Included in Current Liabilities Subject to Exchange Rate Risk Accounts payable 8,912 (364) (4.1) % (523) (5.9) % (801) (9.0) % Net Financial Assets Subject to Exchange Rate Risk $ 85,265 $ (6,329) (7.4) % $ (9,080) (10.6) % $ (13,923) (16.3) % The following table sets forth the local currencies other than the U.S. dollar in which our assets that are subject to exchange rate risk were denominated as of December 31, 2024, and represent a significant concentration upon translation into U.S. dollars.
Dollar by: 10% 15% 25% ($) (%) ($) (%) ($) %) Net sales $ 445,320 $ (22,873) (5.1) % $ (32,818) (7.4) % $ (50,320) (11.3) % Cost and expenses: Cost of sales 124,193 (6,400) (5.2) % (9,182) (7.4) % (14,079) (11.3) % Volume incentives 135,320 (8,257) (6.1) % (11,846) (8.8) % (18,164) (13.4) % Selling, general and administrative 167,058 (4,503) (2.7) % (6,460) (3.9) % (9,906) (5.9) % Operating income $ 18,749 $ (3,713) (19.8) % $ (5,330) (28.4) % $ (8,171) (43.6) % Certain of our operations, including Russia and Ukraine, are served by a U.S. branch through third-party entities, for which all business is conducted in U.S. dollars.
Dollar by: 10% 15% 25% ($) (%) ($) (%) ($) %) Net sales $ 454,364 $ (23,758) (5.2) % $ (34,087) (7.5) % $ (52,267) (11.5) % Cost and expenses: Cost of sales 129,676 (6,546) (5.0) % (9,392) (7.2) % (14,400) (11.1) % Volume incentives 140,589 (8,389) (6.0) % (12,037) (8.6) % (18,456) (13.1) % Selling, general and administrative 164,004 (4,249) (2.6) % (6,097) (3.7) % (9,349) (5.7) % Operating income $ 20,095 $ (4,574) (22.8) % $ (6,561) (32.6) % $ (10,062) (50.1) % Certain of our operations, including Russia and Ukraine, are served by a U.S. branch through third-party entities, for which all business is conducted in U.S. dollars.
Removed
Additional discussion of the impact on the effect of currency fluctuations has been included in Management’s Discussion and Analysis included in Part II, Item 7 of this report.
Added
Exchange Rate Sensitivity of financial assets and liabilities as of December 31, 2024 ( dollar amounts in thousands ): With Strengthening of U.S.

Other NATR 10-K year-over-year comparisons