Annual report pursuant to Section 13 and 15(d)

OPERATING BUSINESS SEGMENT AND INTERNATIONAL OPERATION INFORMATION

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OPERATING BUSINESS SEGMENT AND INTERNATIONAL OPERATION INFORMATION
 12 Months Ended
Dec. 31, 2012
OPERATING BUSINESS SEGMENT AND INTERNATIONAL OPERATION INFORMATION  
OPERATING BUSINESS SEGMENT AND INTERNATIONAL OPERATION INFORMATION

NOTE 15:  OPERATING BUSINESS SEGMENT AND INTERNATIONAL OPERATION INFORMATION

 

The Company has three 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 has two business segments that operate under the Nature’s Sunshine Products brand and are divided based on the characteristics of their Distributor base, similarities in compensation plans, as well as the internal organization of NSP’s officers and their responsibilities (NSP Americas, Asia Pacific and Europe; and NSP Russia, Central and Eastern Europe). The Company’s third business segment operates under the Synergy WorldWide brand, which distributes its products through different marketing and Distributor compensation plans and products with formulations that are sufficiently different from those of the NSP Americas, Asia Pacific and Europe; and NSP Russia, Central and Eastern Europe to warrant accounting for these operations as a separate business segment. Net sales revenues 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 evaluates performance based on contribution margin (loss) by segment before consideration of certain inter-segment transfers and expenses.

 

Historically, the Company had reported its two business segments that operate under the Nature’s Sunshine Products brand based upon their geographic operations in the United States (NSP United States) and in the countries outside the United States (NSP International).  This was how the Company was regularly evaluated by the chief executive officer and executive team.

 

During 2012, the Company engaged in a reorganization process in which the business segments, the roles of upper management responsible for the operating segments, and the information provided to the chief operating decision maker were reevaluated.  As a result of the reorganization process, the two historical NSP segments (NSP United States and NSP International), which were previously separated based on geographical operations, were divided into two different identifiable segments (NSP Americas, Asia Pacific and Europe; and NSP Russia, Central and Eastern Europe) based on the nature of the business activities of each segment, the existence of Managers responsible for them, and information presented to the chief operating decision maker. The two new segments distribute products in differing ways in that NSP Americas, Asia Pacific and Europe sells products through a mixture of retailing, practitioners and direct selling while NSP Russia, Central and Eastern Europe’s business model is more oriented to a network marketing approach.  The chief operating decision maker now reviews the operating results of the two new NSP segments. The new NSP segments also conform to the revised internal management structure. There was no change to the Synergy WorldWide segment.  The presentation of the comparative information has been revised to conform to the 2012 presentation.

 

Reportable business segment information for the years ended December 31, 2012, 2011 and 2010 is as follows:

 

Year Ended December 31,

 

2012

 

2011

 

2010

 

Net sales revenue:

 

 

 

 

 

 

 

NSP Americas, Asia Pacific and Europe

 

$

208,945

 

$

216,912

 

$

225,213

 

NSP Russia, Central and Eastern Europe

 

57,853

 

56,986

 

56,141

 

Synergy WorldWide

 

100,670

 

93,915

 

68,564

 

Total net sales revenue

 

367,468

 

367,813

 

349,918

 

Contribution margin (1):

 

 

 

 

 

 

 

NSP Americas, Asia Pacific and Europe

 

82,778

 

86,004

 

86,570

 

NSP Russia, Central and Eastern Europe

 

21,957

 

22,374

 

20,755

 

Synergy WorldWide

 

36,142

 

36,143

 

22,962

 

Total contribution margin

 

140,877

 

144,521

 

130,287

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

106,861

 

109,606

 

119,024

 

Contract termination costs

 

—

 

14,750

 

—

 

Operating income

 

34,016

 

20,165

 

11,263

 

 

 

 

 

 

 

 

 

Other income, net

 

1,480

 

1,847

 

2,727

 

Income before provision for income taxes

 

$

35,496

 

$

22,012

 

$

13,990

 

 

 

(1)         Contribution margin consists of net sales revenue less cost of sales and volume incentives expense.

 

Year Ended December 31,

 

2012

 

2011

 

2010

 

Capital expenditures:

 

 

 

 

 

 

 

NSP Americas, Asia Pacific and Europe

 

$

5,684

 

$

993

 

$

1,898

 

NSP Russia, Central and Eastern Europe

 

44

 

66

 

—

 

Synergy WorldWide

 

1,051

 

1,183

 

779

 

Total capital expenditures

 

$

6,779

 

$

2,242

 

$

2,677

 

 

 

 

 

 

 

 

 

Depreciation and amortization:

 

 

 

 

 

 

 

NSP Americas, Asia Pacific and Europe

 

$

3,339

 

$

3,827

 

$

3,721

 

NSP Russia, Central and Eastern Europe

 

36

 

43

 

23

 

Synergy WorldWide

 

703

 

492

 

510

 

Total depreciation and amortization

 

$

4,078

 

$

4,362

 

$

4,254

 

 

As of December 31,

 

2012

 

2011

 

Assets:

 

 

 

 

 

NSP Americas, Asia Pacific and Europe

 

$

136,237

 

$

124,483

 

NSP Russia, Central and Eastern Europe

 

8,558

 

9,030

 

Synergy WorldWide

 

49,124

 

42,298

 

Total assets

 

$

193,919

 

$

175,811

 

 

From an individual country perspective, only the United States comprises approximately 10 percent or more of consolidated net sales revenue for any of the years ended December 31, 2012, 2011 and 2010 as follows:

 

Year Ended December 31,

 

2012

 

2011

 

2010

 

Net sales revenue:

 

 

 

 

 

 

 

United States

 

$

154,716

 

$

159,471

 

$

156,767

 

Other

 

212,752

 

208,342

 

193,151

 

Total net sales revenue

 

$

367,468

 

$

367,813

 

$

349,918

 

 

Revenue generated by each of the Company’s product lines is set forth below (U.S. dollars in thousands):

 

Year Ended December 31,

 

2012

 

2011

 

2010

 

NSP Americas, Asia Pacific and Europe:

 

 

 

 

 

 

 

Herbal Products

 

$

118,211

 

$

121,907

 

$

118,531

 

Vitamins and Mineral and Other Nutritional Supplements

 

80,567

 

81,974

 

91,852

 

Personal Care Products

 

6,150

 

7,503

 

7,924

 

Other Products

 

4,017

 

5,528

 

6,906

 

 

 

208,945

 

216,912

 

225,213

 

NSP Russia, Central and Eastern Europe:

 

 

 

 

 

 

 

Herbal Products

 

$

25,311

 

$

25,120

 

$

26,867

 

Vitamins and Mineral and Other Nutritional Supplements

 

26,147

 

24,202

 

24,416

 

Personal Care Products

 

6,203

 

7,479

 

4,638

 

Other Products

 

192

 

185

 

220

 

 

 

57,853

 

56,986

 

56,141

 

Synergy WorldWide:

 

 

 

 

 

 

 

Herbal Products

 

$

39,607

 

$

33,563

 

$

28,045

 

Vitamins and Mineral and Other Nutritional Supplements

 

54,128

 

50,936

 

32,296

 

Personal Care Products

 

5,350

 

7,526

 

6,542

 

Other Products

 

1,585

 

1,890

 

1,681

 

 

 

100,670

 

93,915

 

68,564

 

Total net sales revenue

 

$

367,468

 

$

367,813

 

$

349,918

 

 

From an individual country perspective, only the United States and Venezuela comprise 10 percent or more of consolidated property, plant and equipment as follows:

 

As of December 31 

 

2012

 

2011

 

Property, plant and equipment

 

 

 

 

 

United States

 

$

20,923

 

$

18,119

 

Venezuela

 

3,535

 

3,939

 

Other

 

3,492

 

3,079

 

Total property, plant and equipment

 

$

27,950

 

$

25,137