Nature's Sunshine Products, a leading manufacturer and marketer of encapsulated herbs and vitamins, has reported falling sales for its fourth and final quarter of 2002 - largely due to its overseas operations.
The company said that the results are in line with its previous advisory regarding anticipated fourth quarter results.
Sales revenue for the quarter ended December 31, 2002, was $71.2 million, compared with $77.3 million for the same period in the prior year, a decline of 7.9 per cent. Net income for the fourth quarter totaled $1.5 million, compared with $3.7 million for the same period in the prior year, a decrease of 60.9 per cent.
For the year ended December 31, 2002, sales revenue totaled $298.7 million, compared to $318.7 million for the same period in the prior year, a decline of 6.3 per cent.
During the year, the Company repurchased on the open market, pursuant to authorization by the Board of Directors, a total of 1,532,000 common shares, at an average price of $11.02 per share. The common share repurchase authorization provides for an additional 193,000 shares to be repurchased.
For the quarter ended December 31, 2002, sales revenue for the Company's United States operation was $43.5 million compared to $43.4 million for the same period in the prior year, an increase of 0.5 per cent. For the year ended December 31, 2002, the Company's United States sales revenue totaled $177.7 million, essentially unchanged from $177.8 million for the same period in the prior year. Benefiting from new marketing initiatives, the Company experienced increases in the United States ranks of both distributors and sales managers. The number of distributors in the United States at the year ended December 31, 2002 totaled approximately 235,000, a gain of 8 per cent. As of December 31, 2002, United States sales managers totaled approximately 6,400, an increase of 6 per cent.
For the quarter ended December 31, 2002, sales revenue for the Company's international operations totaled $27.7 million compared to $34.0 million for the same period in the prior year, a decrease of 18.5 percent. For the year ended December 31, 2002, international sales revenue declined 14.1 per cent, to $121.0 million. The number of international distributors declined to approximately 273,000, from approximately 291,000 in 2001, and sales managers totaled approximately 7,600, compared to approximately 10,100 for the same period in the prior year. The markets experiencing lower results in 2002 were Korea, Venezuela, Japan and Brazil, with Venezuela being negatively impacted due to political unrest and currency devaluations. Increased sales revenue gains were posted in Russia, Ecuador, Mexico, Guatemala and Peru.
Despite higher depreciation expenses associated with expansion of the Company's principal manufacturing and distribution facility located in Spanish Fork, Utah, cost of goods sold as a percent of sales for the year declined to 17.9 per cent, compared to 18.1 per cent for the same period in the prior year. The Company's workforce was reduced by approximately 7.0 per cent, or approximately 75 individuals, as a result of attrition and a hiring freeze instituted during the year.
"With Nature's Sunshine operations in over 21 countries, this has been one of our Company's more challenging years," said Daniel P. Howells, President and CEO. "While the earnings decline was clearly disappointing, the Company remains financially strong, with no long-term debt, ample cash and continuing strong cash flow from operating activities. New marketing programs and products, introduced at our Convention in September, are clearly benefiting domestic results, which currently represents almost 60 per cent of our business. Our focus is on both growing revenues and managing expenses. Nature's Sunshine remains solidly situated, and with steps we are implementing to strengthen international results and expected continuing improvement in the United States, we are encouraged regarding the outlook for 2003."
Nature's Sunshine Products manufactures and markets through direct sales encapsulated and tableted herbal products, high quality natural vitamins and other complementary products. In addition to the US, the Company has operations in South Korea, Brazil, Mexico, Venezuela, Japan, Canada, Colombia, the United Kingdom and Ireland, Peru, Central America, Ecuador, Israel and Singapore. The Company also has exclusive distribution agreements with selected companies in Argentina, Australia, Chile, New Zealand, Malaysia, Norway and the Russian Federation.