Certain information included or incorporated herein by reference in this report may be deemed to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may include, but are not limited to, statements relating to the Company'sour objectives, plans and strategies. All statements (other than statements of historical fact) that address activities, events or developments that the Company intends, expects, projects, believeswe intend, expect, project, believe or anticipatesanticipate will or may occur in the future are forward-looking statements. These statements are often characterized by terminology such as “believe,” “hope,” “may,” “anticipate,” “should,” “intend,” “plan,” “will,” “expect,” “estimate,” “project,” “positioned,” “strategy” and similar expressions, and are based on assumptions and assessments made by management in light of theirour experience and their perception of historical trends, current conditions, expected future developments and other factors theywe believe to be appropriate. For example, information appearing under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” includes forward-looking statements. Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties. Important factors that could cause actual results, developments and business decisions to differ materially from forward-looking statements are more fully described in this report, including the risks set forth under “Risk Factors” in Item 1A, and in the Company's Annual Report on Form 10-K for the year ended December 31, 2017,2018, but include the following:

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

Nature’s Sunshine Products, Inc., together with its subsidiaries (hereinafter referred to collectively as the “Company”), isWe are a natural health and wellness company primarily engaged in the manufacturing and direct selling of nutritional and personal care products. The Company sells itsWe are a Utah corporation with our principal place of business in Lehi, Utah, and sell our products to a sales force of independent distributors who useuses the products themselves or resellresells them to consumers.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries.  All intercompany accounts and transactions are eliminated in consolidation. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of normal recurring accruals), considered necessary for a fair presentation of the Company’sour financial information as of March 31, 2018,2019, and for the three-month periods ended March 31, 20182019 and 2017.2018. The results of operations of any interim period are not necessarily indicative of the results of operations to be expected for the year ending December 31, 2018.2019.

It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’sour Annual Report on Form 10-K for the year ended December 31, 2017.2018.

Noncontrolling interest decreased as a result of the net loss attributable to the noncontrolling interests by $0.2 million$28,000 and $0.3$0.2 million during the three months ended March 31, 20182019 and 2017,2018, respectively. As of March 31, 20182019 and December 31, 2017,2018, noncontrolling interests were $0.2 million$35,000 and $0.4$0.1 million, respectively.

Accrued severance and rent costs were $0.5We recorded $1.6 million and $0.8 million as$0 of March 31, 2018 and December 31, 2017, respectively. The Company did not record any additional restructuring related expenses during the three months ended March 31, 2019 and 2018, respectively, related to severance costs which were recorded in selling, general and 2017,administrative expenses. Accrued severance and rent costs were $1.6 million and $0.3 million as of March 31, 2019 and December 31, 2018, respectively.

 

In February 2018, the FASBFinancial Accounting Standards Board ("FASB") issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Effects from Accumulated Other Comprehensive Income. This update allows a reclassification of stranded tax effects, resulting from the Tax Cuts and Jobs Act 2017, from accumulated other comprehensive income to retained earnings. This ASU will be effective for annual periods beginning after December 15, 2018 with early adoption permitted. The Companyadoption of ASU 2018-02 did not have a material effect on our results of operations, consolidated financial statements and footnote disclosures.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. This ASU modifies the disclosure requirements on fair value measurements in Topic 820 based on the consideration of costs and benefits to promote the appropriate exercise and discretion by entities when considering fair value measurement disclosures and to clarify that materiality is currentlyan appropriate consideration of entities and their auditors when evaluating disclosure requirements. The amendments in this update are effective for reporting periods beginning after December 15, 2019, with early adoption permitted. We are evaluating the potential impact of this standardadoption on itsour condensed consolidated financial statements.

The composition of inventories is as follows (dollar amounts in thousands):

The Company’sOur trading securities portfolio totaled $1.8$1.4 million at March 31, 2018,2019, and $2.0$1.3 million at December 31, 2017,2018, and generated realized gains of $200$0.1 million and $51,000$0 for the three months ended March 31, 20182019 and 2017,2018, respectively.

On July 11, 2017, the Companywe entered into a revolving credit agreement with Bank of America, N.A., with a borrowing limit of $25.0 million, that matures on July 11, 2020 (the “Bank of America Credit“Credit Agreement”). In connection with the closing of the Bank of America Credit Agreement, the Company terminated its revolving credit agreement with Wells Fargo Bank, N.A. (the "Wells Fargo Credit Agreement") and satisfied in full the outstanding balance thereof through borrowings on the Bank of America Credit Agreement. The Company paysWe pay interest on any borrowings under the Bank of America Credit Agreement at LIBOR plus 1.25 percent (3.13(3.74 percent and 2.823.73 percent as of March 31, 20182019 and December 31, 2017,2018, respectively). The Company must pay, and an annual commitment fee of 0.20 percent on the unused portion of the commitment. The Company isWe are required to settle itsour net borrowings under the Bank of America Credit Agreement only upon maturity, and as a result, hashave classified itsour outstanding borrowings as non-current on itsour condensed consolidated balance sheet as of March 31, 2018.2019. At March 31, 20182019 and December 31, 2017,2018, the outstanding balance under the revolving credit facility was $7.7 million and $13.2 million, respectively.

The Bank of America Credit Agreement contains customary financial covenants, including financial covenants relating to the Company’sour solvency, leverage, and minimum EBITDA. In addition, the Bank of America Credit Agreement restricts certain capital expenditures, lease expenditures, other indebtedness, liens on assets, guarantees, loans and advances, dividends, and merger, consolidation and the transfer of assets except as permitted in the Bank of America Credit Agreement. The Bank of America Credit Agreement is collateralized by the Company'sour manufacturing facility, accounts receivable balance, inventory balance and other assets. The Company wasWe were in compliance with the debt covenants set forth in the Bank of America Credit Agreement as of March 31, 2018.2019.

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

Following is a reconciliation of the numerator and denominator of Basic EPS to the numerator and denominator of Diluted EPS for the three months ended March 31, 20182019 and 20172018 (dollar and share amounts in thousands, except for per share information): 

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

During the year ended December 31, 2012, the Company’sour shareholders adopted and approved the 2012 Incentive Plan. The 2012 Incentive Plan provides for the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalent rights, performance awards, stock awards and other stock-based awards. The Compensation Committee of the Board of Directors has authority and discretion to determine the type of award as well as the amount, terms and conditions of each award under the 2012 Incentive Plan, subject to the limitations of the 2012 Incentive Plan. A total of 1,500,000 shares of the Company’s common stock were originally authorized for the granting of awards under the 2012 Stock Incentive Plan. In January 2015, the Company’sour shareholders approved an amendment to the 2012 Incentive Plan, to increase the number of shares of Common Stock reserved for issuance by 1,500,000 shares. The number of shares available for awards, as well as the terms of outstanding awards, are subject to adjustment as provided in the 2012 Incentive Plan for stock splits, stock dividends, recapitalizations and other similar events.

The CompanyWe also maintains the 2009 Incentive Plan,maintain a stock incentive plan, which was approved by shareholders in 2009.2009 (the “2009 Incentive Plan”). The 2009 Incentive Plan also provided for the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalent rights, performance awards, stock awards and other stock-based awards. Under the 2012 Incentive Plan, any shares subject to award, or awards forfeited or reacquired by the Company issued under the 2009 Incentive Plan are available for award up to a maximum of 400,000 shares.

The Company’sOur outstanding stock options include time-based stock options, which vest over differing periods ranging from the date of issuance up to 48 months from the option grant date; and performance-based stock options, which have already vested upon achieving operating income margins of six, eight and ten percent as reported in four of five consecutive quarters over the term of the options.

Stock option activity for the three-month period ended March 31, 2018,2019, is as follows (amounts in thousands, except per share information):

Share-based compensation expense from time-based stock options for the three-month periods ended March 31, 20182019 and 2017,2018, was approximately $13,000$0 and $0.1 million,$13,000, respectively. As of March 31, 20182019 and December 31, 2017,2018, the unrecognized share-based compensation expense related to the grants described above was $0 and $13,000, respectively.$0.

At March 31, 2019, the aggregate intrinsic value of outstanding and exercisable stock options to purchase 1,110,000 shares of common stock was $0.3 million. At December 31, 2018, the aggregate intrinsic value of outstanding and exercisable stock options to purchase 1,295,0001,114,000 shares of common stock shares of common stock was $0.7$0.2 million. At December

For the three-month period ended March 31, 2017, the aggregate intrinsic value of outstanding2019, we did not grant any stock options to purchase 1,390,000 shares of the common stock under the exercisable options2012 Stock Incentive Plan to purchase 1,293,000 shares of common stock, and options to purchase 92,000 shares of common stock expected to vest was $0.9 million, $0.9 million and $0, respectively.our board members, executive officers or other employees.

For the three-month period ended March 31, 2018, the Companywe issued 30,000 shares of common stock upon the exercise of stock options at an average exercise price of $5.88 per share. The aggregate intrinsic values of options exercised during the three-month period ended March 31, 2018 was $0.2 million and the Companywe recognized $32,000 of tax benefits from the exercise of stock options during the period. There was no stock option activity for the three-month period ended March 31, 2017.

As of March 31, 20182019 and December 31, 2017, the Company2018, we did not have any unvested performance-based stock options outstanding.

The Company’sOur outstanding restricted stock units ("RSUs"),RSUs include time-based RSUs, which vest over differing periods ranging from 12 months up to 4836 months from the RSU grant date, as well as performance-based RSUs, which vest either upon achieving cumulative annual nettargets relating to sales growth, targets over a rolling one-year period earnings-per-share, and/or upon achieving earnings-per-share targets over a rolling one-year period.stock price levels. RSUs given to the Board of Directors contain a restriction period in which the shares are not issued until two years after vesting. At March 31, 20182019 and December 31, 2017,2018, there were 95,00093,000 and 96,000,80,000, respectively, vested RSUs given to the Board of Directors that had a restriction period.

Restricted stock unit activity for the three-month period ended March 31, 2018,2019, is as follows (share amounts in thousands, except per share information):

During the three-month period ended March 31, 2018, the Company2019, we granted 203,000281,000 RSUs under the 2012 Incentive Plan to the Company’sour executive officers and other employees, which were composed of both time-based RSUs and net sales and adjusted EBITDAshare-price performance-based RSUs. The time-based RSUs were issued with a weighted-average grant date fair value of $11.36$8.61 per share and vest in annual installments over a three-year period from the grant date. The net sales and adjusted EBTIDA earnings-per-shareshare-price performance-based RSUs were issued with a weighted-average grant date fair value of $11.20$4.38 per share and vest upon achieving share-price targets over a three-year period from the grant date.

Except for share-priced performance RSUs, RSUs are valued at market value on the date of grant, which is the grant date share price discounted for expected dividend payments during the vesting period. For RSUs with post-vesting restrictions, a Finnerty Model was utilized to calculate a valuation discount from the market value of common shares reflecting the restriction embedded in the RSUs preventing the sale of the underlying shares over a certain period of time. The Finnerty Model proposes to estimate a discount for lack of marketability such as transfer restrictions by using an option pricing theory. This model has gained recognition through its ability to address the magnitude of the discount by considering the volatility of a company’s stock price and the length of restriction. The concept underpinning the Finnerty Model is that restricted stock cannot be sold over a certain period of time. Using assumptions previously determined for the application of the option pricing model at the valuation date, the Finnerty Model discount for lack of marketability is approximately 11.9 percent for a common share.

Share-based compensation expense from RSUs for the three-month periods ended March 31, 20182019 and 2017,2018, was approximately $0.5$0.1 million and $0.7$0.5 million, respectively. As of March 31, 20182019 and December 31, 2017,2018, the unrecognized share-based compensation expense related to the grants described above was $2.2$2.3 million and $1.3$1.8 million, respectively. As of March 31, 2018,2019, the remaining compensation expense is expected to be recognized over the weighted average period of approximately 1.51.7 years.

The Company has not recognized any share-basedShare-based compensation expense related to the net sales and earnings-per-share performance-based RSUs for the three-month periodsperiod ended March 31, 2019 and 2018 was $0.1 million and 2017.$0, respectively. Should the Companywe attain all of the metrics related to the performance-based RSU grant, the Companywe would recognize up to $4.0$2.7 million of potential share-based compensation expense.

The number of shares issued upon vesting of RSUs granted pursuant to the Company'sour share-based compensation plans is net of the minimum statutory withholding requirements that the Company payswe pay on behalf of itsour employees, which was 40,00011,000 and 38,00040,000 shares for the three-month period ended March 31, 20182019 and 2017,2018, respectively. Although shares withheld are not issued, they are treated as common share repurchases for accounting purposes, as they reduce the number of shares that would have been issued upon vesting. These shares do not count against the authorized capacity under the repurchase program described above.

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

The Company hasOur four business segments that are divided based on the different characteristics of their distributor and customer bases, distributor compensation plans and product formulations, as well as the internal organization of itsour officers and their responsibilities and business operations. Three business segments operate under the Nature’s Sunshine Products brand (NSP Americas; NSP Russia, Central and Eastern Europe; and NSP China), and one business segment operates under the Synergy® WorldWide brand. The NSP Russia, Central and Eastern Europe segment also includes the Company’sour wholesale business, in which the Company sells itswe sell our products to various locally-managed entities independent of the Company that the Company haswe have granted distribution rights for the relevant market. Net sales for each segment have been reduced by intercompany sales as they are not included in the measure of segment profit or loss reviewed by the chief executive officer. The Company evaluatesWe evaluate performance based on contribution margin (loss) by segment before consideration of certain inter-segment transfers and expenses.

Reportable business segment information is as follows (dollar amounts in thousands):

Revenue generated by each of the Company’s product lines is set forth below (dollar amounts in thousands):

 

 

The Company isWe are party to various legal proceedings. Management cannot predict the ultimate outcome of these proceedings, individually or in the aggregate, or their resulting effect on the Company’sour business, financial position, results of operations or cash flows as litigation and related matters are subject to inherent uncertainties, and unfavorable rulings could occur. Were an unfavorable outcome to occur, there exists the possibility of a material adverse impact on theour business, financial position, results of operations, or cash flows for the period in which the ruling occurs and/or future periods. The Company maintainsWe maintain product liability, general

 

The Company hasWe have reserved for certain state sales and use tax and foreign non-income tax contingencies based on the likelihood of an obligation in accordance with accounting guidance for probable loss contingencies. Loss contingency provisions are recorded for probable losses at management’s best estimate of a loss, or when a best estimate cannot be made, a minimum loss contingency amount is recorded. The Company providesWe provide provisions for potential payments of tax to various tax authorities for contingencies related to non-income tax matters, including value-added taxes and sales tax. The Company providesWe provide provisions for U.S. state sales taxes in each of the states where the Company haswe have nexus. As of March 31, 20182019 and December 31, 2017,2018, accrued liabilities were $0.2$0.3 million and $0.4$0.3 million, respectively, related to non-income tax contingencies. While management believeswe believe that the assumptions and estimates used to determine this liability are reasonable, the ultimate outcome of those matters cannot presently be determined. The Company believesWe believe future payments related to these matters could range from $0 to approximately $3.9$3.4 million.

 

The Company isWe are party to various other legal proceedings in the United States and several foreign jurisdictions related to value-added tax assessments and other civil litigation. As of March 31, 20182019 and December 31, 2017,2018, accrued liabilities were $1.2$1.9 million and $1.5$1.7 million, respectively, related to the estimated outcome of these proceedings. In addition, the Company iswe are party to other litigation where there is a reasonable possibility that a loss may be incurred, either the losses are not considered to be probable or the Companywe cannot at this time estimate the loss, if any; therefore, no provision for losses has been provided.  The Company believesWe believe future payments related to these matters could range from $0 to approximately $2.0$0.4 million.

During the three months ended March 31, 2019 and 2018, the Company'sour joint venture in China borrowed $0 and $2.0 million from the Company, and $0.5 million the Company's joint venture partner.respectively. These notes are payable in one year and bear interest of 3.0 percent. As of March 31, 20182019 and December 31, 2017 outstanding borrowings by the joint venture from the Company's JV partner were $1.0 million and $0.5 million, respectively. As of March 31, 2018 and December 31, 2017 outstanding borrowings by the joint venture from the Company were $4.0$6.1 million and $2.0$6.0 million, respectively. TheThese notes betweeneliminate in consolidation.

During the three months ended March 31, 2019 and 2018, our joint venture in China borrowed $0 and $0.5 million from our joint venture partner, respectively. These notes are payable in one year and bear interest of 3.0 percent. As of March 31, 2019 and December 31, 2018 outstanding borrowings by the joint venture from our JV partner were $1.5 million and $1.5 million, respectively. These notes are presented as current liabilities on the Company eliminate in consolidation.Condensed Consolidated Balance Sheets.

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

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

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

 

 

The following table presents the Company’s hierarchy for its assets, measured at fair value on a recurring basis, as of December 31, 20172018 (dollar amounts in thousands):

For the three months ended March 31, 2018,2019, and for the year ended December 31, 2017,2018, there were no fair value measurements using significant other observable inputs (Level 2) or significant unobservable inputs (Level 3).

 

The carrying amounts reflected on the consolidated balance sheet for cash and cash equivalents, accounts receivable, and accounts payable approximate fair value due to their short-term nature. The carrying amount reflected on the consolidated balance sheet for the revolving credit facility approximate fair value due to it being variable-rate debt. During the three months ended March 31, 20182019 and 2017,2018, the Company did not have any re-measurements of non-financial assets at fair value on a nonrecurring basis subsequent to their initial recognition.

The Company hasWe have made the accounting policy election to treat shipping and handling as a fulfillment activity rather than a promised service under Topic 606.

The CompanyWe generally expensesexpense volume incentives when incurred because the amortization period would have been one year or less.

The following Management’s Discussion and Analysis should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included in this report, as well as the consolidated financial statements, the notes thereto, and management’s discussion and analysis included in the Company'sour Annual Report on Form 10-K for the year ended December 31, 2017.2018.

 

The Company isWe are a natural health and wellness company primarily engaged in the manufacturingmanufacture and direct sellingsale of nutritional and personal care products. The Company has four business segments thatWe are divided based on the different characteristicsa Utah corporation with our principal place of their distributor and customer bases, distributor compensation plans and product formulations, as well as the internal organization of its officers and their responsibilities and business operations. Three business segments operate under the Nature’s Sunshine Products brand (NSP Americas; NSP Russia, Central and Eastern Europe; and NSP China), and one business segment operates under the Synergy® WorldWide brand. The NSP Russia, Central and Eastern Europe segment also includes the Company’s wholesale business in which the Company sells its products to various locally-managed entities independent of the Company that the Company has granted distribution rights for the relevant market.

In the first quarter of 2018,2019, the Company experienced an increase in its consolidated net sales of 5.14.5 percent (or 1.47.1 percent in local currencies) compared to the same period in 2017.2018. NSP Russia, Central and Eastern Europe net sales increased approximately 13.118.9 percent (or 20.8 percent in local currencies) compared to the same period in 2018. NSP Americas net sales decreased approximately 7.7 percent compared to the same period in 2017. NSP Americas net sales decreased approximately 6.2 percent compared to the same period in 2017,2018, (or 6.87.0 percent in local currencies). NSP China net sales increased approximately 52.352.4 percent compared to the same period in 20172018 (or 42.561.4 percent in local currencies). Synergy WorldWide net sales increased approximately 16.510.0 percent compared to the same period in 20172018 (or 8.114.7 percent in local currencies). The weakeningstrengthening of the U.S. dollar versus the local currencies, primarily in the Company'sour Asian and European markets, resulted in an approximate 1.4 percent or $3.0a $2.3 million increasedecrease of itsour net sales during the quarter.

The Company distributes itsWe distribute our products to consumers through an independent sales force comprised of independent Managers and Distributors, many of whom also consume the Company'sour products. Typically a person who joins the Company’sour independent sales force begins as a Distributor. An independent Distributor may earn Manager status by attaining certain product sales levels. On a worldwide basis, active independent Managers were approximately 13,70014,000 and 14,90013,700 and active independent Distributors and customers were approximately 224,100232,800 and 234,300224,100 at March 31, 20182019 and 2017,2018, respectively.

As an international business, the Company haswe have significant sales and costs denominated in currencies other than the U. S.U.S. Dollar. Sales in international markets denominated in foreign currencies are expected to continue to represent a substantial portion of the Company'sour sales. Likewise, the Company expects itswe expect foreign markets with functional currencies other than the U.S. Dollar will continue to represent a substantial portion of itsour overall sales and related operating expenses. 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 the market'sforeign markets financial statements into itsour reporting currency.

The following table summarizes the Company'sour unaudited consolidated operating results from continuing operations in U.S. dollars and as a percentage of net sales for the three months ended March 31, 20182019 and 20172018 (dollar amounts in thousands):

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 three months ended March 31, 20182019 and 20172018 (dollar amounts in thousands): 

Consolidated net sales for the three months ended March 31, 2018,2019, were $87.3$91.3 million compared to $83.1$87.3 million for the same period in 2017,2018, or an increase of approximately 5.14.5 percent. The increase was primarily related to product sales in NSP China, growth in NSP Russia, Central and Eastern Europe, and continued growth in Synergy Asia. Growth in these markets was offset by declines in the NSP Americas markets and Synergy Europe markets. Excluding the favorableunfavorable impact of foreign currency exchange rate fluctuations, the Company'sour consolidated net sales would have increased 1.47.1 percent from 2017.the same period in 2018.

Net sales related to NSP Americas for the three months ended March 31, 2018,2019, were $41.9$38.7 million, compared to $44.6$41.9 million for the same period in 2017,2018, or a decrease of 6.27.7 percent. In local currency, net sales decreased 6.87.0 percent, compared to the same period in 2017. Net sales declined primarily due to interruptions in customer service associated with2018. The declines for the implementation of the Oracle ERP system, which began in the Company's NSP America's segment at the beginning of the second quarter of 2017, which caused disruption in the Company's call center and online product ordering system. While the Company has addressed these issues, customer attrition rates increased. As a result, the Company believes the baseline in NSP Americas has been set at a lower level.business are further discussed in United States and Latin America commentary below. Active independent Managers within NSP Americas totaled approximately 6,200 and 6,500 and 7,300 at each of March 31, 20182019 and 2017,2018, respectively. Active independent Distributors and customers within NSP Americas totaled approximately at104,100 and 107,700 and 123,500 at March 31, 2019 and 2018, respectively. Our decrease in Distributor recruiting and 2017, respectively. The issues associated withretention in the implementation of the Oracle ERP system negatively impacted the Company's ability to attract new Distributors and customers, and retain existing Distributors and customers, which was a significant cause for the decreaseU.S. resulted in decline in the number of our independent Managers, Distributors and customers. Independent Managers were down 8.1customers by 3.3 percent and active independent Distributors and customers were down 4.44.6 percent, respectively, compared to the prior year.

Notable activity in the following markets contributed to the results of NSP Americas:

 

In the United States, net sales decreased approximately $2.4$1.7 million, or 6.75.3 percent, for the three months ended March 31, 2018,2019, compared to the same period in 2017.2018. The decrease was primarilydecline in the market is mainly due to the issues associateda decrease in Distributor recruiting and retention. We continue to work with the implementation of the Oracle ERP systemleaders in the Company's NSP Americas segment at the beginning the second quarter of 2017, which has continuedU.S. to impact net sales.improve recruiting and retention results.

In Latin America, net sales decreased approximately $0.3$1.2 million, or 5.019.1 percent, for the three months ended March 31, 2018,2019, compared to the same period in 2017.2018. In local currency, net sales decreased 7.017.1 percent compared to the same period in 2017.2018. Currency devaluation had a $0.1 million unfavorable impact on net sales for the three months ended March 31, 2018.2019. The decreasedecline in net sales was primarilythe market is mainly due to the issues associated with the implementation of the Oracle ERP systemdecreases in the Company's NSP Americas segment at the beginning of the second quarter of 2017, which has continued to impact net sales. Net

Net sales related to NSP Russia, Central and Eastern Europe markets (primarily Russia, the Ukraine, Poland, and Belarus), for the three months ended March 31, 2018,2019, were $9.6$11.4 million, compared to $8.4$9.6 million for the same period in 2017,2018, an increase of 13.118.9 percent. The functional currency for most of these markets is the U.S. Dollar which reduces the effect from foreign currency fluctuations. Fluctuations in foreign exchange rates had a $0.2 million unfavorable impact on net sales

 

Synergy WorldWide reported net sales for the three months ended March 31, 2018,2019, of $31.8$35.0 million, compared to $27.3$31.8 million for the same period in 2017,2018, an increase of 16.510.0 percent. The increase was primarily due to local currency sales increases in the Company's Korean and Japanese markets, and the favorable fluctuationsFluctuations in foreign exchange rates which had a $2.3$1.5 million favorableunfavorable impact on net sales for the three months ended March 31, 2018.2019. Excluding the impact of fluctuations in foreign exchange rates, local currency net sales in Synergy WorldWide would have increased by 8.114.7 percent from the same period in 2017.2018. The increase for the Synergy Worldwide business is further discussed below. Active independent Managers within Synergy WorldWide totaled approximately 3,7004,000 and 4,5003,700 at March 31, 20182019 and 2017,2018, respectively. Active independent Distributors and customers within Synergy WorldWide totaled approximately 47,30049,700 and 46,10047,300 at March 31, 2019 and 2018, and 2017, respectively. Synergy WorldWide’s business model is operating under a traditional direct selling approach.

Notable activity in the following markets contributed to the results of Synergy WorldWide:

 

In South Korea, net sales increased $3.2$3.9 million, or 28.527.0 percent, for the three months ended March 31, 2018,2019, compared to the same period in 2017.2018. In local currencies, net sales increased 19.333.3 percent compared to the same period in 2017.2018. The increase in local currency net sales was the result of an increased distributor involvement and focus on core products for the market as well as an easing of geopolitical tension and an improvement in economic conditions that unfavorably impacted the prior year.market.

In Japan, net sales increased approximately $1.2$0.4 million, or 32.58.2 percent, for the three months ended March 31, 2018,2019, compared to the same period in 2017.2018. In local currencies, net sales increased 26.110.0 percent compared to the same period in 2017. The Company attributes2018. We attribute the increase in net sales in Japan primarily to the introduction of new products and the implementation of programs intended to stimulate activity including the adoption of Korea's distributor recognition program last year, which continued to drivehad a positive impact on market sales improvements in the first quarter of 2018.volume.

In Europe, net sales decreased approximately $0.3$0.9 million, or 4.516.5 percent, for the three months ended March 31, 2018,2019, compared to the same period in 2017.2018. In local currency net sales decreased 17.39.7 percent compared to the same period in 2017.2018. The decrease in local currency net sales is primarily due to market saturationa decrease in Distributor recruiting and retention in certain European countries and a reduction in sales activity in the market's Scandinavian countries.

In North America, net sales decreasedincreased approximately $0.2$0.5 million, or 5.919.3 percent, for the three months ended March 31, 2018,2019, compared to the same period in 2017.2018. The declineincrease in sales is primarily driven by lower Distributor recruiting. Growthgrowth initiatives have been developed and implemented to more effectively support recruiting and Distributor training and motivation.

NSP China had net sales for the three months ended March 31, 2018,2019, of $4.1$6.3 million, compared to $2.7$4.1 million for the same period in 2017,2018, an increase of 52.352.4 percent. NetFluctuations in foreign exchange rates had $0.4 million unfavorable impact on net sales were positively impacted byfor the Company receiving its direct selling license in May 2017, which allowsthree months ended March 31, 2019. In local currency, net sales increased 61.4 percent for the Companythree months ended March 31, 2019, compared to expand its business scope to include direct selling activities within China.2018. NSP China continues to show growth primarily due to effortsinitiatives designed to increase distributorindependent service providers’ engagement levels and gain market share.

Further information related to NSP Americas, NSP Russia, Central and Eastern Europe, Synergy WorldWide, and NSP China business segments is set forth in Note 7 to the Unaudited Condensed Consolidated Financial Statements in Part 1, Item 1 of this report.

 

Selling, general and administrative expenses represent operating expenses, components of which include payroll and benefits, sales events, professional fees, travel and entertainment, marketing, occupancy costs, communication costs, bank fees, depreciation and amortization, independent service fees in China, and other miscellaneous operating expenses.

Selling, general and administrative expenses increased by approximately $2.1$1.5 million to $32.4$33.9 million for the three months ended March 31, 2018.2019. Selling, general and administrative expenses were 37.1 percent of net sales for the three months ended March 31, 2018,2019, compared to 36.537.1 percent for the same period in 2017.2018.

The increase in selling, general and administrative expenses for the three months ended March 31, 2018,2019, was primarily related to $1.2$1.6 million of increased depreciationU.S. restructuring related to Oracle.costs.

Other income (expense) net, for the three months ended March 31, 2018,2019, decreased $0.5 million to $0.7$0.8 million as compared to the same period in 2017.2018. Other income for the three months ended March 31, 2018,2019, primarily consisted of foreign exchange gains.losses.

 

 

As of March 31, 20182019 and December 31, 2017, the Company2018, we had accrued $4.7$2.1 million and $4.6$2.2 million, respectively, related to unrecognized tax positions. This net increasedecrease was primarily attributed to increasesdecreases in transfer pricingforeign tax contingencies.

 

The Company’sOur line of over 700 products includes several different product classifications, such as immune, cardiovascular, digestive, personal care, weight management and other general health products. The Company purchasesWe purchase herbs and other raw materials in bulk and, after rigorous quality control testing, it formulates, encapsulates, tabletswe formulate, encapsulate, tablet or concentratesconcentrate them, labelslabel and packagespackage them for shipment. Most of our products are manufactured at the Company'sour facility in Spanish Fork, Utah. Contract manufacturers produce some of the Company'sour products in accordance with the Company's exactingour specifications and standards. The Company hasWe have implemented stringent quality control procedures to verify that itsour contract manufacturers have complied with itsour specifications and standards.

Presented below areSee Note 7, Segment Information, for a summary of the U.S. dollar amounts and associated revenue percentages from the sale of general health, immune, cardiovascular, digestive, personal care and weight management products for the three months ended March 31, 20182019 and 2017,2018, by business segment.