Nature’s Sunshine Products, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Segment Information

Segment Information

6 Months Ended

Jun. 30, 2019

We have four business segments (Asia, Europe, North America and Latin America and Other) based primarily upon the geographic region where each segment operates, as well as the internal organization of our officers and their responsibilities. Each of the geographic segments operate under the Nature’s Sunshine Products and Synergy® WorldWide brands. The Latin America and Other segment includes our wholesale business in which we sell products to various locally-managed entities independent of the Company that we have granted distribution rights for the relevant market.

Historically, our operating segments were based on brand, customer base, geographical operations with three operating business segments under the Nature’s Sunshine Products brand (NSP Americas; NSP Russia, Central and Eastern Europe; and NSP China), and one operating business segment under the Synergy® WorldWide brand.

During the second quarter of 2019, we realigned into geographic focused operating business segments across brands to further align regional strategies and drive synergies in product, organizational and go-to-market strategies in local markets. Our internal reporting structure was reorganized to support the new reporting segments and the chief operating decision maker now reviews the operating results of the four segments utilizing a geographic focused format. The presentation of the comparative information has been recast to conform to the 2019 presentation.

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. We 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):



	Three Months Ended June 30,					Six Months Ended June 30,
	2019		2018			2019		2018
Net sales:
Asia	$	35,162	$	35,767		$	68,758	$	63,530
Europe	15,075		13,922			30,672		28,525
North America	34,620		35,518			71,143		73,623
Latin America and Other	5,867		6,059			11,423		12,930
Total net sales	90,724		91,266			181,996		178,608

Contribution margin (1):
Asia	16,291		17,275			32,402		29,641
Europe	4,822		4,648			9,827		9,709
North America	12,026		11,180			25,418		24,592
Latin America and Other	2,418		2,393			4,740		4,821
Total contribution margin	35,557		35,496			72,387		68,763

Selling, general and administrative expenses (2)	31,019		33,310			64,871		65,696
Operating income	4,538		2,186			7,516		3,067

Other income (loss), net	306		(1,807		)	258		(1,067		)
Income before provision for income taxes	$	4,844	$	379		$	7,774	$	2,000

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

(2) Service fees in China totaled $2.3 million and $4.5 million for the three and six-month periods ended June 30, 2019, respectively, compared to $2.5 million and $4.0 million for the three and six-month periods ended June 30, 2018. These service fees are included in selling, general and administrative expenses.

From an individual country perspective, the United States and South Korea comprise 10 percent or more of consolidated net sales for the three and six-month periods ended June 30, 2019 and 2018, as follows (dollar amounts in thousands):



	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Net sales:
United States	$	32,194	$	32,914	$	66,155	$	68,140
South Korea	18,923		19,608		37,451		34,192
Other	39,607		38,744		78,390		76,276
	$	90,724	$	91,266	$	181,996	$	178,608

Net sales generated by each of our product lines is set forth below (dollar amounts in thousands):



	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Asia
General health	$	10,752	$	8,519	$	18,836	$	14,753
Immune	199		133		357		434
Cardiovascular	11,561		13,496		23,394		23,398
Digestive	7,333		6,274		12,108		11,698
Personal care	1,820		3,086		6,087		5,268
Weight management	3,497		4,259		7,976		7,979
	35,162		35,767		68,758		63,530
Europe
General health	$	5,372	$	5,424	$	11,120	$	10,928
Immune	1,090		832		2,363		1,776
Cardiovascular	2,766		2,806		5,617		5,863
Digestive	3,550		3,134		7,181		6,362
Personal care	1,661		1,048		3,160		2,211
Weight management	636		678		1,231		1,385
	15,075		13,922		30,672		28,525
North America
General health	$	14,934	$	15,731	$	30,682	$	31,830
Immune	3,340		3,344		7,558		8,279
Cardiovascular	4,935		4,870		10,011		9,671
Digestive	8,523		8,521		17,244		17,497
Personal care	1,598		1,268		2,946		2,843
Weight management	1,290		1,784		2,702		3,503
	34,620		35,518		71,143		73,623
Latin America and Other
General health	$	1,783	$	1,794	$	3,395	$	3,878
Immune	602		567		1,210		1,267
Cardiovascular	361		288		700		766
Digestive	2,645		2,931		5,181		5,883
Personal care	260		302		517		613
Weight management	216		177		420		523
	5,867		6,059		11,423		12,930
	$	90,724	$	91,266	$	181,996	$	178,608

From an individual country perspective, only the United States comprised 10 percent or more of consolidated property, plant and equipment as follows (dollar amounts in thousands):



	June 30, 2019		December 31, 2018
Property, plant and equipment:
United States	$	57,608	$	60,606
Other	4,303		3,455
Total property, plant and equipment	$	61,911	$	64,061

Total assets per segment is set forth below (dollar amounts in thousands):



	June 30, 2019		December 31, 2018
Assets:
Asia	$	72,752	$	59,983
Europe	17,683		16,414
North America	117,182		109,091
Latin America and Other	8,634		7,528
Total assets	$	216,251	$	193,016