The following Management's Discussion and Analysis discussion should be read in conjunction with the unaudited consolidated financial statements and notes thereto included in this report, as well as the consolidated financial statements, the notes thereto, and management's discussion and analysis included in our Annual Report on Form 10-K/A for the year ended December 31, 2008, and our other filings, including Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, that have been filed with the SEC through the date of this report.

Throughout this report, we refer to Natures Sunshine Products, Inc., together with its subsidiaries, as "we," "us," "our Company" or "the Company."

OVERVIEW

Nature's Sunshine Products, Inc. and its subsidiaries are primarily engaged in the manufacturing and marketing of herbal products, vitamin and mineral supplements, personal care products, and miscellaneous products. Nature's Sunshine Products, Inc. is a Utah corporation with its principal place of business in Provo, Utah. We sell our products to a sales force of independent Distributors and Managers who use the products themselves or resell them to other Distributors or consumers. The formulation, manufacturing, packaging, labeling, advertising, distribution and sale of each of our major product groups are subject to regulation by one or more governmental agencies.

We market our products in the United States, Mexico, Central America, Canada, Venezuela, the Dominican Republic, Japan, Ecuador, the United Kingdom, Colombia, Peru, Israel, Russia, Ukraine, Latvia, Lithuania, Kazakhstan, Mongolia, Belarus, China, Poland, and Brazil. We also export our products to several other countries, including Argentina, Australia, Chile, New Zealand, and Norway.

We also sell our products through a separate division and operating business segment, Synergy Worldwide, which was acquired by us in 2000. Synergy Worldwide offers products with formulations different from those of the Nature's Sunshine Products offerings. In addition, Synergy Worldwide's marketing and Distributor compensation plans are sufficiently different from those of Nature's Sunshine Products. Synergy Worldwide sells products in Japan, the United States, South Korea, Singapore, Thailand, Taiwan, Malaysia, Hong Kong, the Philippines, Indonesia, the United Kingdom, Germany, Austria, the Netherlands, and Australia.

During the first six months of 2009, we experienced a decline in our consolidated net sales compared to the same period in 2008 of 13.0 percent. This decline is primarily due to the negative impact of currency exchange rates in our foreign markets, as well as weakening demand in certain foreign markets and our domestic markets as a result of current economic conditions. Our Nature's Sunshine Products International business segment ("NSP International") experienced a decline in net sales of approximately 23.6 percent compared to the same period in 2008, while our domestic business segment ("NSP United States") net sales decreased approximately 2.7 percent. Our Synergy Worldwide business segment ("Synergy Worldwide") experienced a decline in net sales revenue of approximately 9.7 percent compared to 2008, primarily due to current economic conditions and foreign currency fluctuations. A significant portion of the decline in our NSP International is the result of significant declines in the values of the Russian ruble and the Ukrainian hryvnia against the U.S. dollar, which have increased the price of our products significantly in these markets. Over the same period, our cost of goods sold increased as a percentage of net sales revenue primarily as a result of increased promotions within our foreign markets, while our selling, general and administrative expenses decreased primarily as a result of reduced spending in our Russian, Ukrainian, and Eastern European markets as a result of reduced sales in these markets, as well as the positive impact of foreign currency fluctuations in many of our foreign markets.

RESULTS OF OPERATIONS



The following table summarizes our unaudited consolidated operating results in
U.S. dollars and as a percentage of net sales for the three months ended
June 30, 2009 and 2008 (dollar amounts in thousands).



                                                                               Change from
                                 2009                    2008                  2008 to 2009
                          Total     Percent of    Total     Percent of
                         dollars    net sales    dollars    net sales      Dollar     Percentage
Net sales revenue        $ 84,149        100.0 % $ 95,911        100.0 %  $ (11,762 )      (12.3 )%

Cost of goods sold         15,787         18.8     16,796         17.5       (1,009 )       (6.0 )
Volume incentives          31,217         37.1     36,457         38.0       (5,240 )      (14.4 )
SG&A expenses              35,089         41.7     39,280         41.0       (4,191 )      (10.7 )
Total operating
expenses                   82,093         97.6     92,533         96.5      (10,440 )      (11.3 )
Operating income            2,056          2.4      3,378          3.5       (1,322 )      (39.1 )
Other income, net             544          0.7        312          0.3          232         74.4
Income before
provision for income
taxes                       2,600          3.1      3,690          3.8       (1,090 )      (29.5 )
Provision for income
taxes                       1,066          1.3      4,391          4.5       (3,325 )      (75.7 )
Net income (loss)        $  1,534          1.8 % $   (701 )       (0.7 )% $   2,235        318.8 %

The following table summarizes our unaudited consolidated operating results in U.S. dollars and as a percentage of net sales for the six months ended June 30, 2009 and 2008 (dollar amounts in thousands).

                                                                                 Change from
                                  2009                     2008                  2008 to 2009
                           Total     Percent of     Total     Percent of
                          dollars    net sales     dollars    net sales      Dollar     Percentage
Net sales revenue        $ 167,325        100.0 % $ 192,362        100.0 %  $ (25,037 )      (13.0 )%

Cost of goods sold          33,334         19.9      36,013         18.7       (2,679 )       (7.4 )
Volume incentives           62,213         37.2      73,054         38.0      (10,841 )      (14.8 )
SG&A expenses               72,566         43.4      79,018         41.1       (6,452 )       (8.2 )
Total operating
expenses                   168,113        100.5     188,085         97.8      (19,972 )      (10.6 )
Operating (loss)
income                        (788 )       (0.5 )     4,277          2.2       (5,065 )     (118.4 )
Other income
(expense), net               1,748          1.1         (47 )          -        1,795      3,819.1
Income before
provision for income
taxes                          960          0.6       4,230          2.2       (3,270 )      (77.3 )
Provision for income
taxes                          888          0.5       5,374          2.8       (4,486 )      (83.5 )
Net income (loss)        $      72          0.1 % $  (1,144 )       (0.6 )% $   1,216        106.3 %

Net Sales Revenue

Net sales revenue for the three and six months ended June 30, 2009 was $84.1 million and $167.3 million compared to $95.9 million and $192.4 million for the same periods in 2008, a decrease of approximately 12.3 percent and 13.0 percent, respectively. The decrease in net sales revenue for the three and six months ended June 30, 2009 is primarily due to the negative impact of currency exchange rates in our foreign markets as a result of the strengthening of the U.S. dollar against most foreign currencies in which our subsidiaries operate and its impact on consumer demand in these markets, as well as weakening demand in certain foreign markets and our domestic markets as a result of current economic conditions.

Net sales revenue of NSP United States for the three and six months ended June 30, 2009, was $39.5 million and $76.0 million, respectively, compared to $39.2 million and $78.1 million for the same periods in the prior year, an increase of 0.8 percent and a decrease of 2.7 percent. The decrease in sales of NSP United States is primarily related to a decrease in consumer demand as a result of current economic conditions in the United States during the six months ended June 30, 2009 from the same period in the prior year.

NSP International reported net sales revenue for the three and six months ended June 30, 2009 of $31.6 million and $65.2 million, respectively, compared to $42.0 million and $85.3 million for the same periods in 2008, a decrease of approximately 24.8 percent and 23.6 percent. The decrease in sales is primarily due to foreign currency fluctuations as a result of the strengthening of the U.S. dollar against the currencies in substantially all markets in which NSP International operates, and the effect of the strengthening U.S. dollar on customer purchasing power for our products in these markets. A significant portion of the decline in our NSP International's net sales is the result of significant declines in the values of the Russian ruble and the Ukrainian hryvnia against the U.S. dollar, which have increased the price of our products significantly in these markets. In the Ukraine, net sales decreased $3.5 million or 43.8 percent and $7.2 million or 42.6 percent during the three month and six month ended June 30, 2009, respectively, compared to the same periods in 2008, primarily as a result of a decrease in the Ukrainian hryvnia of approximately 62.1 percent and 60.9 percent, respectively, against the U.S. dollar compared to the same periods in 2008. In Russia, we experienced a decrease in sales of $3.5 million or 35.0 percent and $5.1 million or 25.0 percent during the three and six month periods ended June 30, 2009, respectively, compared to the same periods in 2008, primarily as a result of a decrease in the Russian ruble of approximately 36.8 percent and 38.4 percent, respectively, against the U.S. dollar compared to the same periods in 2008. Foreign currency exchange rate fluctuations excluding Ukraine and Russia negatively impacted revenues for the three and six month periods ended June 30, 2009 by $2.4 million and $4.7 million, respectively, compared to the same periods in 2008. For the three months and six months ended June 30, 2009, approximately $1.0 million and $2.0 million, respectively, of the negative foreign currency rate fluctuations relate to Mexico. Excluding the impact of foreign currency fluctuations, sales for Mexico decreased approximately $0.4 million or 7.3 percent and $1.1 million or 11.5 percent during three and six month periods ended June 30, 2009, respectively, compared to the same periods in 2008 primarily due to a corresponding decrease in Distributors as a result of current economic conditinos. Excluding the impact of foreign currency fluctuations, we experienced decreases in Japan net sales of $0.9 million or 34.2 percent and $1.5 million, or 31.1 percent during the three and six months ended June 30, 2009, respectively, compared to the same periods in 2008, as a result of a corresponding decrease in the number of Distributors as well as current economic conditions in Japan.

Net sales revenue of Synergy Worldwide for the three and six months ended June 30, 2009 was $13.0 million and $26.2 million, respectively, compared to $14.8 million and $29.0 million for the same periods in 2008, a decrease of 12.2 percent and 9.7 percent, due primarily to current economic conditions in Japan and the effect of foreign currency fluctuations of $0.9 million and $1.8 million negatively impacting revenue as a result of the U.S. dollar strengthening against the currencies of the markets in which Synergy Worldwide operates for the three and six months ended June 30, 2009, respectively, compared to the prior year periods.

We distribute our products to customers through an independent sales force comprised of Distributors and Managers. A person who joins our independent sales force begins as a "Distributor," and a Distributor interested in earning additional income by committing more time and effort to selling our products may earn "Manager" status. Manager status is contingent upon attaining certain purchase volume levels, recruiting additional Distributors, and demonstrating leadership abilities. Active Distributors totaled approximately 691,500 and 718,500, at June 30, 2009 and 2008, respectively. Active Managers totaled approximately 28,900 and 26,800 at June 30, 2009 and 2008, respectively.

Further information related to the NSP United States, NSP International and Synergy Worldwide is set forth in Note 8 to the Unaudited Condensed Consolidated Financial Statements in Part 1, Item 1 of this report.

Cost of Goods Sold

For the three and six months ended June 30, 2009, cost of goods sold, as a percent of net sales revenue, increased to 18.8 percent and 19.9 percent of net sales revenue, respectively, compared to 17.5 percent and 18.7 percent for the same periods in the prior year primarily as a result of additional promotions offered in our foreign markets.

Volume Incentives

We pay sales commissions ("Volume Incentives") to our Managers and Distributors based upon the amount of sales group product purchases. Volume Incentives are a significant part of our direct sales marketing program. These payments are designed to provide incentives for reaching higher sales levels and for recruiting additional Distributors. As a percent of net sales revenue, Volume Incentives decreased during the three and six months ended June 30, 2009 as compared to the same period in 2008, primarily as a result of decreased Volume Incentives in our United States and Japanese markets. Volume incentive decreased due to declines in qualifying sales volumes and the impact on the mix of sales within our various markets, which have differing Volume Incentive rates based upon their respective sales marketing programs.

Selling, General and Administrative

Selling, general and administrative expenses as a percent of net sales revenue increased to 41.7 percent and 43.4 percent in the three and six months ended June 30, 2009, respectively, compared to 41.0 percent and 41.1 percent for the same periods in 2008. In absolute terms, our selling, general and administrative expenses decreased by $4.2 million for the three months ended June 30, 2009

compared to the same period in 2008, from $39.3 million to $35.1 million, and by $6.4 million for the six months ended June 30, 2009 compared to the same period in 2008, from $79.0 million to $72.6 million. The decreases were primarily due to decreased spending in our Russian, Ukrainian, and Eastern European markets of approximately $2.4 million and $3.9 million during the three and six months ended June 30, 2009, respectively, as a result of the declines in net sales revenue in these markets. The decreases are also a result of foreign currency fluctuations in our other foreign markets of $1.4 million and $2.9 million, of which $0.4 million and $0.8 million relates to Synergy Worldwide. In addition, non-income tax contingencies within NSP United States decreased approximately $0.2 million and $1.5 million during the three and six months ended June 30, 2009, respectively. These decreases were offset by increases in selling, general, and administrative costs of approximately $0.9 million and $2.4 million, respectively, within NSP United States primarily as a result of increased professional fees related to the preparation and filing of our recent SEC filings and other legal matters (which includes $0.6 million related to the potential settlement of the SEC investigation of the Company as described in Note 10 of the Unaudited Condensed Consolidated Financial Statements in Part 1, Item 1 of this report).

Operating Income (Loss)

Operating income decreased $1.3 million during the three months ended June 30, 2009 compared to the same period in 2008, from operating income of $3.4 million to operating income of $2.1 million, and $5.1 million during the six months ended June 30, 2009 compared to same period in 2008, from operating income of $4.3 million to an operating loss of $0.8 million. Operating income for NSP International decreased $3.0 million and $5.2 million for the three and six months ended June 30, 2009 compared to same periods in 2008 as a result of decreased sales due to foreign currency fluctuations and general economic conditions within these markets. In addition, operating losses for Synergy Worldwide increased $1.2 million for the six months ended June 30, 2009 compared to the same period in 2008 as result of decreased sales and increased costs in certain of the markets in which it operates. However, its operating losses decreased $0.6 million in the second quarter compared to the same period in the prior year, primarily due to the release of non-income tax related contingencies of $0.6 million. These non-income tax related contingencies are recorded within selling, general, and administrative expenses. These operating losses were offset by an increase in the operating income of NSP United States of approximately $1.1 million and $1.3 million during the three and six months ended June 30, 2009 compared with the same periods in 2008 primarily due decreases in non-income tax related contingencies of $0.2 million and $1.5 million, respectively, as well as declines in volume incentives as a percentage of sales during the three and six months ended June 30, 2009 compared to the same periods in the prior year.

Other Income (Expense), Net

Other income (expense), net for the three and six months ended June 30, 2009 increased $0.2 million and $1.8 million, respectively, compared to the same periods in 2008 primarily due to foreign exchange gains in certain markets based on changes in exchange rates.

Income Taxes

Interim income taxes are based on an estimated annualized effective tax rate applied to the respective quarterly periods, adjusted for discrete tax items in the period in which they occur. For the three months ended June 30, 2009 and 2008, the Company's provision for income taxes, as a percentage of income before income taxes, was approximately 41.0 percent and 119.0 percent, respectively, compared with a U.S. federal statutory rate of 35.0 percent. For the six months ended June 30, 2009 and 2008, the Company's provision for income taxes, as a percentage of income before income taxes, was approximately 92.5 percent and 127.0 percent, respectively, compared with a U.S. federal statutory rate of 35.0 percent.

The differences between the effective rate and the federal statutory rate for the three and six months ended June 30, 2009 and 2008 are primarily attributed to increases in tax liabilities associated with uncertain tax positions, the U.S tax impact of foreign operations, and increases in foreign valuation allowances primarily related to foreign subsidiary net losses for which no tax benefit is being recognized. With the Company's low pretax income amounts, tax amounts recorded related to the uncertain tax positions, valuation allowances, and other permanent tax items have a significant impact to the effective tax rate.

As of June 30, 2009, the Company had accrued $19.3 million (net of $11.3 million of other assets related to competent authority and royalty benefits) related to unrecognized tax positions compared with $19.7 million (net of $11.3 million of other assets related to competent authority and royalty benefits) as of December 31, 2008. This net decrease is primarily attributed to reductions in liabilities recorded related to commission payment withholdings in foreign jurisdictions and transfer pricing.

The Company's U.S. federal income tax returns for 2003 through 2008 are open to examination for federal tax purposes. The Company has several foreign tax jurisdictions which have open tax years from 2000 through 2008. The IRS is currently conducting an audit of the Company's U.S. federal income tax returns for the 2003 through 2005 tax years and the Company is in discussions with the IRS related to these open tax years. The Company is currently unable to determine the outcome of these discussions and their related impact, if any, on the Company's financial condition, results of operations, or cash flows.

Although the Company believes its estimates are reasonable, the Company can make no assurance that the final tax outcome of these matters will not be different from that which it has reflected in its historical income tax provisions and accruals. Such difference could have a material impact on the Company's income tax provision and operating results in the period in which the Company makes such determination.

LIQUIDITY AND CAPITAL RESOURCES

Our principal use of cash is to pay for operating expenses, including Volume Incentives, capital assets, inventory purchases, the funding of international expansion, and the payment of quarterly dividends. As of June 30, 2009, working capital was $30.4 million compared to $30.2 million as of December 31, 2008. At June 30, 2009, we had $32.8 million in cash and cash equivalents, and $3.3 million of short-term investments, which are available to be used along with our normal cash flows from operations to fund unanticipated shortfalls in future cash flows.

For the six months ended June 30, 2009, we used $3.0 million of cash to fund operations compared to providing $7.1 million for the same period in 2008. The decrease in cash provided from operating cash flows is primarily due to changes in our effective tax rate and the related impact on the determination of income taxes payable, payments on income taxes, as well as changes in the timing of cash payments related to fluctuations in other operating assets and liabilities.

Capital expenditures for the first six months of 2009 were $1.8 million related to the purchase of equipment, computer systems and software, compared to $5.8 million, for the same period in the prior year, of which $4.0 million is related to the purchase of a warehouse in Venezuela.

We also had cash proceeds of $2.1 million from the sale of restricted investments during the six months ended June 30, 2009 and cash proceeds of $0.6 million and $0.6 million from the sale of investments available-for-sale during the six months ended June 30, 2009 and 2008, respectively. In addition, we had net short-term borrowings of $1.0 million for the six months ended June 30, 2009.

We used cash to pay quarterly dividends of $0.8 million for the six months ended June 30, 2009 compared to $1.6 million for the same period in 2008. The Company has also suspended payment of the quarterly cash dividend. The suspension of cash dividends is expected to preserve approximately $3.1 million of annual cash flow in the Company's United States operations following a period of exceptional legal and accounting expenses.

There were no stock options exercised during the six months ended June 30, 2009 and 2008.

We believe that working capital requirements can be met for the foreseeable future through our available cash and cash equivalents, and cash generated from operating activities; however, a prolonged economic downturn or a decrease in the demand for our products could adversely affect our long-term liquidity. In the event of a significant decrease in cash provided by operating activities, it might be necessary for us to obtain additional external sources of funding.

We do not currently maintain a long-term credit facility or any other external sources of long-term funding; however, we believe that such funding could be obtained on competitive terms in the event additional sources of funding become necessary.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and form the basis for the following discussion and analysis on critical accounting policies and estimates. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On a regular basis we evaluate our estimates and assumptions. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates and those differences could have a material effect on our financial position and results of operations. Management has discussed the development, selection and disclosure of these estimates with the Board of Directors and its Audit Committee.

A summary of our significant accounting policies is provided in Note 1 of the Notes to Consolidated Financial Statements in Item 8 of our Annual Report on Form 10-K/A for the year ended December 31, 2008. We believe the critical accounting policies and estimates described below reflect our more significant estimates and assumptions used in the preparation of our consolidated financial statements. The impact and any associated risks on our business that are related to these policies are also discussed throughout this "Management's Discussion and Analysis of Financial Condition and Results of Operations" where such policies affect reported and

expected financial results.

Revenue Recognition

Net sales revenue and related volume incentive expenses are recorded when persuasive evidence of an arrangement exists, collectability is reasonably assured, the amount is fixed and determinable, and title and risk of loss have passed, generally when the merchandise has been delivered. The amount of the volume incentive is determined based upon the amount of qualifying purchases in a given month. It is necessary for the Company to make estimates about the timing of when merchandise has been delivered. These estimates are based upon the Company's historical experience related to time in transit, timing of when shipments occurred, and shipping volumes. Amounts received for undelivered merchandise are recorded as deferred revenue. From time to time, the Company's United States operation extends short-term credit associated with product promotions. In addition, for certain of the Company's international operations, the Company offers credit terms consistent with industry standards within the country of operation. Payments to Distributors and Managers for sales incentives or rebates are recorded as a reduction of revenue. Payments for sales incentives and rebates are calculated monthly based upon qualifying sales. Membership fees are recorded as revenue over the life of the membership, primarily one year. Prepaid event registration fees are deferred and recognized as revenues when the related event is held.

A reserve for product returns is recorded based upon historical experience. The Company allows Distributors or Managers to return the unused portion of products within ninety days of purchase if they are not satisfied with the product. In . . .