Nature's Sunshine Products Inc.
03/10/2026 | Press release | Distributed by Public on 03/10/2026 15:11
Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)
Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion highlights the principal factors that have affected our financial condition, results of operations, liquidity and capital resources for the periods described. This discussion should be read in conjunction with our consolidated financial statements and the related notes in Item 8, Part 2 of this report. This discussion contains forward-looking statements. Please see "Cautionary Note Regarding Forward-Looking Statements" for the risks, uncertainties and assumptions associated with these forward-looking statements.
OVERVIEW
Our Business, Industry and Target Market
We are a global leader in manufacturing and marketing high-quality herbal and nutritional supplements. 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. 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. 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.
2025 Performance
In 2025, we experienced an increase in our consolidated net sales of 5.7 percent (or 5.3 percent in local currencies) compared to 2024. Asia net sales increased approximately 6.7 percent (or 6.4 percent in local currencies) compared to 2024. Europe net sales increased approximately 9.8 percent (or 7.8 percent in local currencies) compared to 2024. North America net sales increased approximately 3.4 percent (or 3.6 percent in local currencies) compared to 2024. Latin America and Other net sales decreased approximately 5.5 percent (or 4.2 percent in local currencies) compared to 2024. The strengthening of the U.S. dollar versus the local currencies, primarily in our Europe and Asia markets, resulted in an approximate 0.4 percent, or $1.8 million, increase of our net sales during the year ended December 31, 2025.
Cost of sales increased $2.7 million during 2025, compared to the same period in 2024, and as a percentage of net sales, were 27.6 percent and 28.5 percent for 2025 and 2024, respectively. The decrease in cost of sales percentage is primarily due to cost savings initiatives and market mix.
In absolute terms, selling, general and administrative expenses increased $14.4 million during 2025, and as a percentage of net sales, were 37.2 percent and 36.1 percent for 2025 and 2024, respectively. The increase was primarily related to the timing of compensation costs, incremental investment in digital marketing and consultant events, increased service fees due to China's higher net sales, as well as other non-recurring 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. 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. There continues to be sustained conflict and disruption in the region, which is expected to endure for the foreseeable future. Our consultants in the impacted regions 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. We will continue monitoring the social, political, regulatory and economic environment in Ukraine and Russia and will consider further actions as appropriate.
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.
Net sales related to Eastern Europe for the years ended December 31, 2025 and 2024, were $60.0 million and $54.8 million, respectively. Operating income related to Eastern Europe for the years ended December 31, 2025 and 2024, were $4.7 million and $4.2 million, respectively. As of December 31, 2025, Eastern Europe had assets of $5.0 million, net of working capital reserves related to inventories.
In November 2024, we began an internal investigation regarding our past compliance with relevant U.S. trade controls and made an initial voluntary self-disclosure of apparent trade controls violations to the U.S. Department of Commerce's
Bureau of Industry and Security ("BIS"). In addition, in April 2025, we filed an initial voluntary self-disclosure with the Office of Foreign Asset Control ("OFAC") relating to the same internal investigation. Following our internal investigation, we filed final voluntary self-disclosures with BIS and OFAC on September 5, 2025. We estimate that such potential violations 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. 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 the timing of resolution of these matters.
China Joint Ventures
On June 30, 2025, we entered into share purchase agreements with Fosun Industrial Co., Ltd. ("Fosun Industrial," an affiliate of Fosun Pharma) to purchase Fosun Industrial's interest in our two joint ventures, Nature's Sunshine Hong Kong Limited and Shanghai Nature's Sunshine Health Products Co., Ltd., for cash consideration in the amount of $3.9 million and $3.1 million, respectively.
On December 17, 2025, we completed the purchase of Fosun Industrial's interests in both joint ventures. We acquired the interests in Nature's Sunshine Hong Kong Limited for cash consideration of $3.1 million and acquired the interest in Shanghai Nature's Sunshine Health Products for total consideration consisting of $2.9 million paid at closing and an additional $1.0 million payable on December 17, 2027.
Tariffs
While we did not experience material impacts as a result of tariffs in 2025, we continue to monitor the additional pressure that tariff-related price increases may have on our business, including the price, availability and quality of raw materials and other ingredients. We expect that tariffs will continue to adversely affect our costs in 2026.
Critical Accounting Policies and Estimates
Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("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. We have discussed the development, selection and disclosure of these estimates with the Board of Directors and our Audit Committee.
A summary of our significant accounting policies is provided in Note 1, "Nature of Operations and Significant Accounting Policies," to our Consolidated Financial Statements, in Item 8, Part 2 of this report. We believe the critical accounting policies and estimates described below reflect our more significant estimates and assumptions used in the preparation of the 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
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. To estimate any necessary adjustments, various assumptions are made in regard to excess or slow-moving inventories, non-conforming inventories, expiration dates, current and future product demand, production planning and market conditions. If future demand and market conditions are less favorable than our assumptions, additional inventory adjustments could be required.
Incentive Trip Accrual
We accrue expenses associated with our direct sales program, which rewards independent consultants with paid attendance for incentive trips, including our conventions and meetings. Expenses associated with incentive trips are accrued over qualification periods as the trips are earned. We specifically analyze incentive trip accruals based on historical and current sales trends as well as contractual obligations when evaluating the adequacy of the incentive trip accrual. Actual results could generate liabilities in amounts greater or less than the amounts recorded. We had accrued incentive trip costs of approximately $4.8 million and $5.2 million at December 31, 2025 and 2024, respectively, which are included in accrued liabilities in the consolidated balance sheets.
Contingencies
We are involved in certain legal proceedings and disputes. When a loss is considered probable in connection with litigation or non-income tax contingencies and when such loss can be reasonably estimated with a range, we record our best estimate within the range related to the contingency. If there is no best estimate, we record the minimum of the range. As additional information becomes available, we assess the potential liability related to the contingency and revise the estimates. Revisions in estimates of the potential liabilities could materially affect our results of operations in the period of adjustment. Our contingencies are discussed in further detail in Note 11, "Commitments and Contingencies," to our Consolidated Financial Statements, in Item 8, Part 2 of this report.
Income Taxes
Our income tax expense, deferred tax assets and liabilities and contingent reserves reflect our best assessment of estimated future taxes to be paid. We are subject to income taxes in both the United States and numerous foreign jurisdictions. Significant judgments and estimates are required in determining consolidated income tax expense.
Deferred income taxes arise from temporary differences between the tax and financial statement recognition of revenue and expense. In evaluating our ability to recover our deferred tax assets, management considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial operations. In projecting future taxable income, we develop assumptions including the amount of future state, federal and foreign pretax operating income, the reversal of temporary differences and the implementation of feasible and prudent tax planning strategies. These assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates that we are using to manage the underlying businesses. Valuation allowances are recorded as reserves against net deferred tax assets by us when it is determined that net deferred tax assets are not likely to be realized in the foreseeable future. As of December 31, 2025 and 2024, we had recorded valuation allowances of $20.9 million and $18.9 million, respectively, as offsets to deferred tax assets.
At December 31, 2025, foreign subsidiaries had unused operating loss carryovers for tax purposes of approximately $5.1 million. The net operating losses will expire at various dates from 2026 through 2036, with the exception of those in some foreign jurisdictions where there is no expiration. As of December 31, 2025, we had approximately $14.8 million of foreign tax and withholding credits. Of the $14.8 million credits, $14.7 million are foreign tax credits, 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. Income tax positions must meet a more-likely-than-not recognition threshold to be recognized.
PRESENTATION
Net sales represents gross sales including shipping and handling offset by discounts and volume rebates given to independent consultants. Volume rebates as a percentage of retail sales may vary by country, depending upon regulatory restrictions that limit or otherwise restrict rebates. We also offer reduced volume rebates with respect to certain products and promotions worldwide.
Our gross profit consists of net sales less cost of sales, which represents our manufacturing costs, the price we pay to raw material suppliers and manufacturers of our products and duties and tariffs, as well as shipping and handling costs related to product shipments and distribution to our independent consultants.
Volume incentives are a significant part of our direct sales marketing program and represent commission payments made to our independent consultants. These payments are designed to provide incentives for reaching higher sales levels through their own sales and the sales of independent consultants in their sales organization. Volume incentives vary slightly, on a percentage basis, by product due to our pricing policies and commission plans in place in various operations.
Selling, general and administrative expenses represent operating expenses, components of which include labor and benefits, sales events, professional fees, travel and entertainment, consultant marketing, occupancy costs, communication costs, bank fees, independent service fees paid to independent service providers in China, depreciation and amortization and other miscellaneous operating expenses.
Most of our sales to independent consultants outside the United States are made in the respective local currencies. In preparing our consolidated financial statements, sales are translated into U.S. dollars using average exchange rates. Additionally, the majority of our purchases from suppliers are generally made in U.S. dollars. Consequently, a strengthening of the U.S. dollar versus a foreign currency can have a negative impact on our reported sales and contribution margins and can generate transaction losses on intercompany payable balances in the local markets.
RESULTS OF OPERATIONS
The following table summarizes our consolidated net income from continuing operations results as a percentage of net sales for the periods indicated:
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Net sales | 100.0 | % | 100.0 | % | |||||||
| Cost of sales | (27.6) | (28.5) | |||||||||
| Gross profit | 72.4 | 71.5 | |||||||||
| Operating expenses: | |||||||||||
| Volume incentives | 30.1 | 30.9 | |||||||||
| Selling, general and administrative | 37.2 | 36.1 | |||||||||
| Operating income | 5.1 | 4.5 | |||||||||
| Other income (expense): | |||||||||||
| Interest and other income, net | 0.1 | - | |||||||||
| Interest expense | - | - | |||||||||
| Foreign exchange gains (losses), net | 0.9 | (0.4) | |||||||||
| 1.0 | (0.4) | ||||||||||
| Income from operations before provision for income taxes | 6.1 | 4.1 | |||||||||
| Provision for income taxes | 1.9 | 2.3 | |||||||||
| Net income | 4.2 | % | 1.8 | % | |||||||
Net Sales
International operations have provided, and are expected to continue to provide, a significant portion of our total net sales. As a result, total net sales will continue to be affected by fluctuations in the U.S. dollar against foreign currencies. In order to provide a framework for assessing how our underlying businesses performed, excluding the effect of foreign currency fluctuations, in addition to comparing the percent change in net sales from one period to another in U.S. dollars, we present net sales excluding the impact of foreign exchange fluctuations. We compare the percentage change in net sales from one period to another period by excluding the effects of foreign currency exchange as shown below. Net sales excluding the impact of foreign exchange fluctuations is not a U.S. GAAP financial measure and removes from net sales in U.S. dollars the impact of changes in exchange rates between the U.S. dollar and the functional currencies of our foreign subsidiaries by translating the current
period net sales into U.S. dollars using the same foreign currency exchange rates that were used to translate the net sales for the previous comparable period. We believe presenting the impact of foreign currency fluctuations is useful to investors because it allows a more meaningful comparison of net sales of our foreign operations from period to period. However, net sales excluding the impact of foreign currency fluctuations should not be considered in isolation or as an alternative to net sales in U.S. dollar measures that reflect current period exchange rates or to other financial measures calculated and presented in accordance with U.S. GAAP. Throughout the last five years, foreign currency exchange rates have fluctuated significantly. See Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Year Ended December 31, 2025, as Compared to the Year Ended December 31, 2024
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, 2025 and 2024 (dollar amounts in thousands).
| Net Sales by Operating Segment | |||||||||||||||||||||||||||||
| 2025 | 2024 |
Percent Change |
Impact of Currency Exchange |
Percent Change Excluding Impact of Currency |
|||||||||||||||||||||||||
| Asia | $ | 221,777 | $ | 207,794 | 6.7 | % | $ | 668 | 6.4 | % | |||||||||||||||||||
| Europe | 93,133 | 84,837 | 9.8 | % | 1,682 | 7.8 | % | ||||||||||||||||||||||
| North America | 143,611 | 138,849 | 3.4 | % | (210) | 3.6 | % | ||||||||||||||||||||||
| Latin America and Other | 21,623 | 22,884 | (5.5) | % | (295) | (4.2) | % | ||||||||||||||||||||||
| $ | 480,144 | $ | 454,364 | 5.7 | % | $ | 1,845 | 5.3 | % | ||||||||||||||||||||
Consolidated net sales for the year ended December 31, 2025, were $480.1 million compared to $454.4 million in 2024, or an increase of approximately 5.7 percent. The increase was related to product sales increases in our Asia, Europe and North America operating segments. Excluding the impact of foreign currency exchange rate fluctuations, consolidated net sales for the year ended December 31, 2025 would have increased by 5.3 percent from 2024.
Asia
Net sales related to Asia for the year ended December 31, 2025, were $221.8 million compared to $207.8 million for 2024, an increase of 6.7 percent. In local currency, net sales increased by 6.4 percent compared to 2024. Fluctuations in foreign exchange rates had an $0.7 million favorable impact on net sales for the year ended December 31, 2025.
Notable activity in the following markets contributed to the results of Asia:
In our Taiwan market, net sales decreased approximately $3.3 million, or 4.7 percent, for the year ended December 31, 2025, compared to 2024. Fluctuations in foreign exchange rates had a $2.0 million favorable impact on net sales for the year ended December 31, 2025. In local currency, net sales decreased 7.5 percent for the year ended December 31, 2025, compared to 2024. We attribute the decrease in net sales primarily to slower customer acquisition and a reduction in average order value.
In our Japan market, net sales increased approximately $12.1 million, or 27.6 percent, for the year ended December 31, 2025, compared to 2024. Fluctuations in foreign exchange rates had a $0.6 million favorable impact on net sales for the year ended December 31, 2025. In local currency, net sales increased 26.1 percent for the year ended December 31, 2025, compared to 2024. The increase in net sales was primarily the result of strong field fundamentals that drove greater customer acquisition, total orders and average order value.
In our South Korea market, net sales decreased approximately $0.5 million, or 1.0 percent, for the year ended December 31, 2025, compared to 2024. Fluctuations in foreign exchange rates had a $2.2 million unfavorable impact on net sales for the year ended December 31, 2025. In local currency, net sales increased 3.2 percent compared to 2024. The increase in net sales in local currency was primarily the result of greater average order value.
In our China market, net sales increased approximately $6.0 million, or 16.9 percent, for the year ended December 31, 2025, compared to 2024. Fluctuations in foreign exchange rates had minimal impact on net sales for the year ended December 31, 2025. In local currency, net sales increased 16.9 percent for the year ended December 31, 2025, compared to
2024. The increase in net sales was primarily the result a new subscription service that drove greater customer acquisition, total orders and average order value.
Europe
Net sales related to Europe were $93.1 million for the year ended December 31, 2025, compared to $84.8 million for 2024, an increase of 9.8 percent. 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 $1.7 million favorable impact on net sales for the year ended December 31, 2025. Net sales increased primarily as a result of improved customer acquisition and existing customer engagement, as evidenced by expanded total order count and average order size.
North America
Net sales related to North America for the year ended December 31, 2025, were $143.6 million, compared to $138.8 million for 2024, an increase of 3.4 percent. Fluctuations in foreign exchange rates had a $0.2 million unfavorable impact on net sales for the year ended December 31, 2025. Excluding the impact of fluctuations in foreign exchange rates, local currency net sales in North America increased by 3.6 percent from 2024.
In the United States, net sales increased $5.5 million, or 4.3 percent, for the year ended December 31, 2025, compared to 2024. The increase was primarily due to improved customer acquisition through our digital channels with a notable increase in subscription sales.
Latin America and Other
Net sales related to Latin America and Other markets for the year ended December 31, 2025, were $21.6 million, compared to $22.9 million for 2024, a decrease of 5.5 percent. Fluctuations in foreign exchange rates had a $0.3 million unfavorable impact on net sales for the year ended December 31, 2025. Excluding the impact of fluctuations in foreign exchange rates, local currency net sales in Latin America and Other decreased by 4.2 percent from 2024.
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.
Cost of Sales
Cost of sales as a percent of net sales decreased to 27.6 percent in 2025, compared to 28.5 percent in 2024. The decrease in cost of sales percentage is primarily due to cost savings initiatives and market mix.
Volume Incentives
Volume incentives as a percent of net sales decreased to 30.1 percent in 2025, compared to 30.9 percent in 2024. The decrease 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. 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.
Selling, General and Administrative Expenses
Selling, general and administrative expenses represent operating expenses, components of which include labor and benefits, sales events, professional fees, travel and entertainment, marketing, occupancy costs, communications costs, bank fees, depreciation and amortization, independent services fees paid in China and other miscellaneous operating expenses.
Selling, general and administrative expenses increased by $14.4 million to $178.4 million for the year ended December 31, 2025. Selling, general and administrative expenses were 37.2 percent and 36.1 percent of net sales for the years ended December 31, 2025 and 2024, respectively. The increase was primarily related to the timing of compensation costs, incremental investment in digital marketing and consultant events, increased service fees due to China's higher net sales, as well as other non-recurring expenses.
Other Income (Loss), Net
Other income (loss), net, for the years ended December 31, 2025 and 2024, were gains of $5.1 million and losses of $1.7 million, respectively. Other income, for the year ended December 31, 2025 primarily consisted of foreign exchange gains in Europe and Asia, partially offset by foreign exchange losses in North America and Latin America and Other, that resulted from net changes in foreign currencies.
Income Taxes
Our effective tax rate was 31.4 percent for 2025 compared to 57.2 percent for 2024. The decrease in the effective rate from 2024 to 2025 was primarily attributable to the expiration of foreign tax credits in the prior period which did not repeat in the current period and to reduced valuation allowances in some foreign jurisdictions.
The effective rate for 2025 differed from the federal statutory rate of 21.0 percent primarily due to recording a valuation allowance on foreign tax credits which are not expected to be utilized before expiration.
On July 4, 2025, the President of the United States signed into law the One Big Beautiful Bill Act. Pursuant to ASC Topic 740, Income Taxes, the effects of changes in tax law are recognized in the period of enactment and are reflected in our results. There was no material impact to our income tax expense or effective tax rate for the year ended December 31, 2025.
Year Ended December 31, 2024, as Compared to the Year Ended December 31, 2023
For a discussion regarding our financial condition and results of operations for fiscal 2024 compared to fiscal 2023, see Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 11, 2025.
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, 2025, working capital was $100.3 million, compared to $94.9 million as of December 31, 2024. At December 31, 2025, we had $93.9 million in cash and cash equivalents, of which $87.5 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.
Our net consolidated cash inflows (outflows) are as follows (in thousands):
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Operating activities | $ | 35,321 | $ | 25,298 | |||||||
| Investing activities | (6,480) | (10,971) | |||||||||
| Financing activities | (23,773) | (9,905) | |||||||||
Operating Activities
For the year ended December 31, 2025, operating activities provided cash in the amount of $35.3 million compared to $25.3 million in 2024. Operating cash flows increased primarily due to improved net income, the timing of payments for accrued liabilities, accrued volume incentives and service fees, and deferred revenue, partially offset by an increase in inventories.
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, 2025 and 2024, these amounts were $6.5 million and $11.0 million, respectively.
Financing Activities
For the year ended December 31, 2025, financing activities used $23.8 million in cash, compared to $9.9 million in cash used for the same period in 2024.
For the year ended December 31, 2025, we used cash to repurchase 1,260,000 shares of our common stock under the share repurchase program for $16.3 million. At December 31, 2025, the remaining balance available for repurchases under the program was $17.4 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"). At December 31, 2025, 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.
We believe that cash generated from operations, along with available cash and cash equivalents, will be sufficient to fund our normal operating needs, including capital expenditures, on both a short- and long-term basis.
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.
CONTRACTUAL OBLIGATIONS
The following table summarizes information about contractual obligations as of December 31, 2025 (in thousands):
| Total | Less than 1 year | 1-3 years | 3-5 years | After 5 years | |||||||||||||||||||||||||
| Operating lease obligations | $ | 23,239 | $ | 3,963 | $ | 7,536 | $ | 3,544 | $ | 8,196 | |||||||||||||||||||
| Self-insurance reserves (1) | 647 | 647 | - | - | |||||||||||||||||||||||||
| Other liabilities reflected on the balance sheet (2) | 2,132 | - | 1,000 | - | 1,132 | ||||||||||||||||||||||||
| Unrecognized tax benefits(3) | 448 | 20 | - | - | 428 | ||||||||||||||||||||||||
| Revolving credit facility (4) | - | - | - | - | - | ||||||||||||||||||||||||
| Total | $ | 26,466 | $ | 4,630 | $ | 8,536 | $ | 3,544 | $ | 9,756 | |||||||||||||||||||
_______________________________________
(1) At December 31, 2025, there were $0.9 million of liabilities. 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 other liabilities on the consolidated balance sheet.
We maintain product liability coverage to cover possible claims and still maintain accruals for periods prior to obtaining coverage. Prior to this, we accrued $0.3 million that we believe is sufficient to cover probable and reasonably estimable liabilities related to product liability claims based on our history of such claims. However, there can be no assurance that these estimates will prove to be sufficient, nor can there be any assurance that the ultimate outcome of any litigation for product liability will not have a material negative impact on our business prospects, financial position, results of operations or cash flows. 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, 2025, there were $1.1 million of liabilities. We provide a non-qualified deferred compensation plan for our officers and certain key employees. Under this plan, participants may defer up to 100 percent of their annual salary and bonus (less the participant's share of employment taxes). The deferrals become an obligation owed to the participant by us under the plan. Upon separation of the participant from the service with us, the obligation owed to the participant under the plan will be paid as a lump sum or over a period of either three or five years. 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.
On December 17, 2025, we completed the purchase of Fosun Industrial's interests in Shanghai Nature's Sunshine Health Products for total consideration consisting of $2.9 million paid at closing and an additional $1.0 million payable on December 17, 2027, included in other liabilities on the consolidated balance sheet.
(3) At December 31, 2025, there were $0.4 million of liabilities. Because of the high degree of uncertainty regarding the timing of future cash outflows associated with these liabilities, if any, we are unable to estimate the years in which cash settlement may occur with the respective tax authorities, aside from the current portion.
(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. At December 31, 2025, we had $25.0 million available under this facility. At December 31, 2025, there was no outstanding balance under the Credit Agreement.
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.
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