Annual report pursuant to Section 13 and 15(d)

OPERATING BUSINESS SEGMENT AND INTERNATIONAL OPERATION INFORMATION

v3.6.0.2
OPERATING BUSINESS SEGMENT AND INTERNATIONAL OPERATION INFORMATION
 12 Months Ended
Dec. 31, 2016
Segment Reporting [Abstract]  
OPERATING BUSINESS SEGMENT AND INTERNATIONAL OPERATION INFORMATION
OPERATING BUSINESS SEGMENT AND INTERNATIONAL OPERATION INFORMATION
 
The Company has 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 has three 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 and NSP Russia, Central and Eastern Europe; and China and New Markets). The Company’s third business segment operates under the Synergy® WorldWide brand, which distributes its products through different selling and Distributor compensation plans and has products with formulations that are sufficiently different from those of NSP Americas and NSP Russia, Central and Eastern Europe to warrant accounting for these operations as a separate business segment. The Company’s fourth business segment, China and New Markets, anticipates deploying a multi-channel go-to-market strategy that offers select Nature’s Sunshine branded products through direct selling, e-commerce and retail channels across China. The time to market will be dependent upon regulatory processes including product registration and permit approvals. The China and New Markets segment also includes Company’s wholesale business, in which the Company sells its products to various locally managed entities independent of the Company that have distribution rights for the relevant market. All of the net sales to date in the China and New Markets segment is through the Company’s wholesale business to foreign markets, and beginning in the second quarter of 2016, pre-opening product sales through Hong Kong. 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 evaluates performance based on contribution margin (loss) by segment before consideration of certain inter-segment transfers and expenses.
 
In the fourth quarter of 2014, the Company created the China and New Markets segment. The Company moved the reporting of its wholesale business, in which the Company sells its products to a locally managed entity independent of the Company that has distribution rights for the market, from the NSP Americas segment to the China and New Markets segment during the year ended December 31, 2014, as well as the results of its NSP Peru and United Kingdom markets, which were converted to wholesale markets during the prior year. The net sales and contribution margin of this business for the year ended December 31, 2016 were $14.5 million and $8.7 million, respectively. The net sales and contribution margin of this business for the year ended December 31, 2015 were $4.1 million and $1.9 million, respectively. The net sales and contribution margin of this business for the year ended December 31, 2014 were $5.6 million and $2.6 million, respectively.
 
Reportable business segment information for the years ended December 31, 2016, 2015, and 2014 is as follows (dollar amounts in thousands):
Year Ended December 31,
 
2016
 
2015
 
2014
Net sales:
 
 

 
 

 
 

NSP Americas
 
$
175,922

 
$
179,151

 
$
182,395

NSP Russia, Central and Eastern Europe
 
25,971

 
27,408

 
50,274

Synergy WorldWide
 
124,793

 
114,081

 
128,101

China and New Markets
 
14,473

 
4,065

 
5,597

Total net sales
 
341,159

 
324,705

 
366,367

Contribution margin (1):
 
 

 
 

 
 

NSP Americas
 
75,005

 
74,953

 
74,603

NSP Russia, Central and Eastern Europe
 
8,604

 
9,474

 
17,851

Synergy WorldWide
 
38,034

 
35,277

 
43,888

China and New Markets
 
8,669

 
1,870

 
2,633

Total contribution margin
 
130,312

 
121,574

 
138,975

 
 
 
 
 
 
 
Selling, general and administrative (2)
 
120,273

 
107,702

 
119,927

Operating income
 
10,039

 
13,872

 
19,048

 
 
 
 
 
 
 
Other income (loss), net
 
(773
)
 
(592
)
 
(34
)
Income from continuing operations before provision for income taxes
 
$
9,266

 
$
13,280

 
$
19,014

___________________________
(1) Contribution margin consists of net sales less cost of sales and volume incentives expense. For the China and New Markets segment, contribution margin does not include service fees related to pre-opening product sales through Hong Kong.

(2)  Service fees in the China and New Markets segment related to pre-opening product sales through Hong Kong totaled $4.3 million, $0, and $0 for the years ended December 31, 2016, 2015, and 2014, respectively. These service fees are included in the Company's selling, general and administrative expenses.

Year Ended December 31,
 
2016
 
2015
 
2014
Capital expenditures:
 
 

 
 

 
 

NSP Americas
 
$
8,999

 
$
21,437

 
$
25,581

NSP Russia, Central and Eastern Europe
 
131

 
—

 
8

Synergy WorldWide
 
564

 
302

 
1,321

China and New Markets
 
430

 
487

 
—

Total capital expenditures
 
$
10,124

 
$
22,226

 
$
26,910

 
 
 
 
 
 
 
Depreciation and amortization:
 
 

 
 

 
 

NSP Americas
 
$
3,997

 
$
3,603

 
$
3,438

NSP Russia, Central and Eastern Europe
 
42

 
26

 
25

Synergy WorldWide
 
713

 
885

 
946

China and New Markets
 
56

 
11

 
—

Total depreciation and amortization
 
$
4,808

 
$
4,525

 
$
4,409

As of December 31,
 
2016
 
2015
Assets:
 
 

 
 

NSP Americas
 
$
146,761

 
$
141,428

NSP Russia, Central and Eastern Europe
 
6,106

 
5,122

Synergy WorldWide
 
39,083

 
38,048

China and New Markets
 
13,620

 
15,922

Total assets
 
$
205,570

 
$
200,520


 
From an individual country perspective, only the United States and South Korea comprises approximately 10 percent or more of consolidated net sales for any of the years ended December 31, 2016, 2015, and 2014 as follows (dollar amounts in thousands):
Year Ended December 31,
 
2016
 
2015
 
2014
Net sales:
 
 

 
 

 
 

United States
 
$
148,060

 
$
147,553

 
$
148,219

South Korea
 
57,637

 
48,476

 
54,314

Other
 
135,462

 
128,676

 
163,834

Total net sales
 
$
341,159

 
$
324,705

 
$
366,367



Revenue generated by each of the Company’s product lines is set forth below (dollars in thousands):
Year Ended December 31,
 
2016
 
2015
 
2014
NSP Americas:
 
 

 
 

 
 

General health
 
$
78,187

 
$
80,315

 
$
78,218

Immunity
 
19,185

 
22,042

 
23,549

Cardiovascular
 
12,677

 
12,331

 
12,566

Digestive
 
47,659

 
49,239

 
53,133

Personal care
 
7,537

 
3,575

 
4,000

Weight management
 
10,677

 
11,649

 
10,929

 
 
175,922

 
179,151

 
182,395

NSP Russia, Central and Eastern Europe:
 
 

 
 

 
 

General health
 
$
11,059

 
$
11,433

 
$
18,841

Immunity
 
2,898

 
3,328

 
6,512

Cardiovascular
 
1,918

 
1,714

 
3,104

Digestive
 
7,003

 
7,167

 
13,171

Personal care
 
2,202

 
2,716

 
6,073

Weight management
 
891

 
1,050

 
2,573

 
 
25,971

 
27,408

 
50,274

Synergy WorldWide:
 
 

 
 

 
 

General health
 
$
35,283

 
$
43,829

 
$
46,546

Immunity
 
620

 
752

 
974

Cardiovascular
 
51,684

 
34,191

 
42,449

Digestive
 
12,536

 
17,746

 
20,839

Personal care
 
8,981

 
5,697

 
7,196

Weight management
 
15,689

 
11,866

 
10,097

 
 
124,793

 
114,081

 
128,101

China and New Markets:
 
 

 
 

 
 

General health
 
$
3,399

 
$
1,903

 
$
2,370

Immunity
 
821

 
525

 
777

Cardiovascular
 
2,911

 
292

 
334

Digestive
 
5,329

 
1,011

 
1,608

Personal care
 
797

 
93

 
108

Weight management
 
1,216

 
241

 
400

 
 
14,473

 
4,065

 
5,597

Total net sales
 
$
341,159

 
$
324,705

 
$
366,367


 
From an individual country perspective, only the United States comprise 10 percent or more of consolidated property, plant and equipment as follows (dollar amounts in thousands):
As of December 31 
 
2016
 
2015
Property, plant and equipment
 
 

 
 

United States
 
$
70,770

 
$
66,044

Other
 
2,502

 
2,684

Total property, plant and equipment
 
$
73,272

 
$
68,728


 
Due to the continual currency devaluation of the Venezuelan bolivar, as of September 30, 2014, the Company incurred a $2.9 million impairment charge to write down the value of its fixed assets in Venezuela to $0.