Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2018 | Apr. 30, 2018 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | MANNATECH INC | |
Entity Central Index Key | 1,056,358 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Smaller Reporting Company | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2018 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 2,719,271 |
CONSOLIDATED BALANCE SHEETS - (
CONSOLIDATED BALANCE SHEETS - (UNAUDITED) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
ASSETS | ||
Cash and cash equivalents | $ 37,936 | $ 37,682 |
Restricted cash | 1,515 | 1,514 |
Accounts receivable, net of allowance of $572 and $582 in 2018 and 2017, respectively | 400 | 273 |
Income tax receivable | 0 | 907 |
Inventories, net | 9,048 | 9,385 |
Prepaid expenses and other current assets | 3,831 | 2,607 |
Deferred commissions | 3,912 | 3,880 |
Total current assets | 56,642 | 56,248 |
Property and equipment, net | 3,199 | 3,537 |
Construction in progress | 2,263 | 777 |
Long-term restricted cash | 7,598 | 7,565 |
Other assets | 3,944 | 3,876 |
Long-term deferred tax assets, net | 5,362 | 4,239 |
Total assets | 79,008 | 76,242 |
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||
Current portion of capital leases | 152 | 228 |
Accounts payable | 5,453 | 6,008 |
Accrued expenses | 5,724 | 5,771 |
Commissions and incentives payable | 10,690 | 9,658 |
Taxes payable | 3,086 | 2,404 |
Current notes payable | 916 | 815 |
Deferred revenue | 8,605 | 8,561 |
Total current liabilities | 34,626 | 33,445 |
Capital leases, excluding current portion | 127 | 144 |
Long-term deferred tax liabilities | 1,153 | 1,147 |
Other long-term liabilities | 2,850 | 1,265 |
Total liabilities | 38,756 | 36,001 |
Commitments and contingencies | ||
Shareholders’ equity: | ||
Preferred stock, $0.01 par value, 1,000,000 shares authorized, no shares issued or outstanding | 0 | 0 |
Common stock, $0.0001 par value, 99,000,000 shares authorized, 2,742,857 shares issued and 2,719,271 shares outstanding as of March 31, 2018 and 2,742,857 shares issued and 2,702,940 shares outstanding as of December 31, 2017 | 0 | 0 |
Additional paid-in capital | 33,216 | 34,928 |
Retained earnings | 3,586 | 4,190 |
Accumulated other comprehensive income | 6,318 | 5,984 |
Treasury stock, at average cost, 23,586 shares as of March 31, 2018 and 39,917 shares as of December 31, 2017, respectively | (2,868) | (4,861) |
Total shareholders’ equity | 40,252 | 40,241 |
Total liabilities and shareholders’ equity | $ 79,008 | $ 76,242 |
CONSOLIDATED BALANCE SHEETS - 3
CONSOLIDATED BALANCE SHEETS - (UNAUDITED) (Parenthetical) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
ASSETS | ||
Accounts receivable, allowance for doubtful accounts | $ 572 | $ 582 |
Shareholders' equity: | ||
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized (in shares) | 1,000,000 | 1,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized (in shares) | 99,000,000 | 99,000,000 |
Common stock, shares issued (in shares) | 2,742,857 | 2,742,857 |
Common stock, shares outstanding (in shares) | 2,719,271 | 2,702,940 |
Treasury stock, shares (in shares) | 23,586 | 39,917 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - (UNAUDITED) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Income Statement [Abstract] | ||
Net sales | $ 41,383 | $ 40,641 |
Cost of sales | 8,249 | 8,762 |
Gross profit | 33,134 | 31,879 |
Operating expenses: | ||
Commissions and incentives | 16,985 | 17,081 |
Selling and administrative expenses | 7,980 | 8,654 |
Depreciation and amortization expense | 511 | 502 |
Other operating costs | 8,546 | 7,676 |
Total operating expenses | 34,022 | 33,913 |
Loss from operations | (888) | (2,034) |
Interest income | 29 | 29 |
Other income, net | 288 | 41 |
Loss before income taxes | (571) | (1,964) |
Income tax benefit | 307 | 717 |
Net loss | $ (264) | $ (1,247) |
Loss per common share: | ||
Basic (in dollars per share) | $ (0.10) | $ (0.46) |
Diluted (in dollars per share) | $ (0.10) | $ (0.46) |
Weighted-average common shares outstanding: | ||
Basic (in shares) | 2,719 | 2,701 |
Diluted (in shares) | 2,719 | 2,701 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - (UNAUDITED) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Statement of Comprehensive Income [Abstract] | ||
Net loss | $ (264) | $ (1,247) |
Foreign currency translations | 334 | 2,379 |
Comprehensive income | $ 70 | $ 1,132 |
CONSOLIDATED STATEMENT OF SHARE
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY - (UNAUDITED) - 3 months ended Mar. 31, 2018 - USD ($) $ in Thousands | Total | Common stock Par value | Additional paid in capital | Retained earnings | Accumulated other comprehensive income | Treasury stock |
December 31, 2017 at Dec. 31, 2017 | $ 40,241 | $ 0 | $ 34,928 | $ 4,190 | $ 5,984 | $ (4,861) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Net loss | (264) | (264) | ||||
Declared dividends | (340) | (340) | ||||
Charge related to stock-based compensation | 36 | 36 | ||||
Issuance of unrestricted shares | 245 | (1,748) | 1,993 | |||
Foreign currency translations | 334 | 334 | ||||
March 31, 2018 at Mar. 31, 2018 | $ 40,252 | $ 0 | $ 33,216 | $ 3,586 | $ 6,318 | $ (2,868) |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - (UNAUDITED) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net loss | $ (264) | $ (1,247) |
Adjustments to reconcile net loss to net cash provided by operating activities: | ||
Depreciation and amortization expense | 511 | 502 |
Provision for inventory losses | 206 | 111 |
Provision for doubtful accounts | 89 | 44 |
Loss on disposal of assets | 14 | 0 |
Stock-based compensation expense | 281 | 322 |
Deferred income taxes | (1,118) | (187) |
Changes in operating assets and liabilities: | ||
Accounts receivable | (216) | 82 |
Income tax receivable | 907 | 1,431 |
Inventories | 131 | (1,213) |
Prepaid expenses and other current assets | (853) | 246 |
Deferred commissions | 31 | (88) |
Other assets | (67) | 327 |
Accounts payable | (555) | 638 |
Accrued expenses and other liabilities | 182 | (838) |
Taxes payable | 681 | (383) |
Commissions and incentives payable | 1,033 | 119 |
Deferred revenue | 44 | 44 |
Net cash provided by operating activities | 975 | 86 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Acquisition of property and equipment | (282) | (361) |
Proceeds from sale of assets | 1 | 0 |
Net cash used in investing activities | (281) | (361) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Proceeds from stock options exercised | 0 | 54 |
Payment of cash dividends | (340) | (337) |
Repayment of capital lease obligations | (364) | (412) |
Net cash used in financing activities | (704) | (695) |
Effect of currency exchange rate changes on cash and cash equivalents | 298 | 2,238 |
Net increase in cash, cash equivalents, and restricted cash | 288 | 1,268 |
Cash, cash equivalents, and restricted cash at the beginning of the period | 46,761 | 36,626 |
Cash, cash equivalents, and restricted cash at the end of the period | 37,936 | |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||
Income taxes paid | 248 | 255 |
Interest paid on capital leases and financing arrangements | 11 | 18 |
Assets acquired through financing arrangements | $ 1,356 | $ 130 |
ORGANIZATION AND SUMMARY OF SIG
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Mar. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Mannatech, Incorporated (together with its subsidiaries, the “Company”), located in Flower Mound, Texas, was incorporated in the state of Texas on November 4, 1993 and is listed on the NASDAQ Global Select Market under the symbol “MTEX”. The Company develops, markets, and sells high-quality, proprietary nutritional supplements, topical and skin care and anti-aging products, and weight-management products. We currently sell our products into three regions: (i) the Americas (the United States, Canada, Colombia and Mexico); (ii) EMEA (Austria, the Czech Republic, Denmark, Estonia, Finland, Germany, the Republic of Ireland, Namibia, the Netherlands, Norway, South Africa, Spain, Sweden and the United Kingdom); and (iii) Asia/Pacific (Australia, Japan, New Zealand, the Republic of Korea, Singapore, Taiwan, Hong Kong, and China). On July 1, 2017, the Company revised its 2017 Associate Compensation Plan, which was designed to stimulate business growth and development for our active business building associates ( "independent associates" or "associates" ) and to maximize the buying experience for our preferred customers. In doing so, the Company hopes to better utilize commission dollars to stimulate Company growth. The 2017 Associate Compensation Plan provides revised income streams, new leadership levels and titles, and modified various volume requirements for our associates. In addition, the 2017 Associate Compensation Plan re-designated members as preferred customers and modified their pricing structure. Associates and now preferred customers purchase the Company’s products at published wholesale prices. The Company cannot distinguish products sold for personal use from other sales, when sold to associates, because it is not involved with the products after delivery, other than usual and customary product warranties and returns. Only associates are eligible to earn commissions and incentives. The Company operates a non-direct selling business in mainland China. Our subsidiary in China, Meitai Daily Necessity & Health Products Co., Ltd. (“Meitai”), is operating as a traditional retailer under a cross-border e-commerce model in China. Meitai cannot legally conduct a direct selling business in China unless it acquires a direct selling license in China. The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and with instructions for Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, the Company’s consolidated financial statements and footnotes contained herein do not include all of the information and footnotes required by GAAP to be considered “complete financial statements”. However, in the opinion of the Company’s management, the accompanying unaudited consolidated financial statements and footnotes contain all adjustments, including normal recurring adjustments, considered necessary for a fair presentation of the Company’s consolidated financial information as of, and for, the periods presented. The Company cautions that its consolidated results of operations for an interim period are not necessarily indicative of its consolidated results of operations to be expected for its fiscal year. The December 31, 2017 consolidated balance sheet was included in the audited consolidated financial statements in the Company’s annual report on Form 10-K for the year ended December 31, 2017 and filed with the United States Securities and Exchange Commission (the “SEC”) on March 26, 2018 (the “2017 Annual Report”), which includes all disclosures required by GAAP. Therefore, these unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company included in the 2017 Annual Report. Principles of Consolidation The consolidated financial statements and footnotes include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Use of Estimates The preparation of the Company’s consolidated financial statements in accordance with GAAP requires the use of estimates that affect the reported value of assets, liabilities, revenues and expenses. These estimates are based on historical experience and various other factors. The Company continually evaluates the information used to make these estimates as the business and economic environment changes. Historically, actual results have not varied materially from the Company’s estimates and the Company does not currently anticipate a significant change in its assumptions related to these estimates. However, actual results may differ from these estimates under different assumptions or conditions. The use of estimates is pervasive throughout the consolidated financial statements, but the accounting policies and estimates considered the most significant are described in this note to the consolidated financial statements, Organization and Summary of Significant Accounting Policies . Cash, Cash Equivalents, and Restricted Cash The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. The Company includes in its cash and cash equivalents credit card receivables due from its credit card processor, as the cash proceeds from credit card receivables are received within 24 to 72 hours. As of March 31, 2018 and December 31, 2017 , credit card receivables were $2.7 million and $2.0 million , respectively. As of March 31, 2018 and December 31, 2017 , cash and cash equivalents held in bank accounts in foreign countries totaled $33.8 million and $30.6 million , respectively. The Company invests cash in liquid instruments, such as money market funds and interest bearing deposits. The Company also holds cash in high quality financial institutions and does not believe it has an excessive exposure to credit concentration risk. A significant portion of our cash and cash equivalent balances were concentrated within the Republic of South Korea, with total net assets within this foreign location totaling $34.4 million and $32.7 million at March 31, 2018 and December 31, 2017 , respectively. In addition, for the three months ended March 31, 2018 , a concentrated portion of our operating cash flows were earned from operations within the Republic of South Korea. An adverse change in economic conditions within the Republic of South Korea could negatively affect the Company’s results of operations. The Company is required to restrict cash for: (i) direct selling insurance premiums and credit card sales in the Republic of Korea; (ii) reserve on credit card sales in the United States and Canada; and (iii) the Australia building lease collateral. As of each of March 31, 2018 and December 31, 2017 , our total restricted cash was $9.1 million . The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Company's consolidated balance sheets to the total amount presented in the consolidated statement of cash flows (in thousands) : March 31, 2018 December 31, 2017 Cash and cash equivalents at beginning of period $ 37,682 $ 28,687 Current restricted cash at beginning of period 1,514 1,510 Long-term restricted cash at beginning of period 7,565 6,429 Cash, cash equivalents, and restricted cash at beginning of period $ 46,761 $ 36,626 Cash and cash equivalents at end of period $ 37,936 $ 37,682 Current restricted cash at end of period 1,515 1,514 Long-term restricted cash at end of period 7,598 7,565 Cash, cash equivalents, and restricted cash at end of period $ 47,049 $ 46,761 Accounts Receivable Accounts receivable are carried at their estimated collectible amounts. Receivables are created upon shipment of an order if the credit card payment is rejected or does not match the order total. As of each of March 31, 2018 and December 31, 2017 , receivables consisted primarily of amounts due from preferred customers and associates. As of March 31, 2018 and December 31, 2017 , the Company's accounts receivable balance (net of allowance) was $0.4 million and $0.3 million , respectively. The Company periodically evaluates its receivables for collectability based on historical experience, recent account activities, and the length of time receivables are past due and writes-off receivables when they become uncollectible. As of each of March 31, 2018 and December 31, 2017 , the Company held an allowance for doubtful accounts of $0.6 million . Inventories Inventories consist of raw materials, finished goods, and promotional materials that are stated at the lower of cost (using standard costs that approximate average costs) or net realizable value. The Company periodically reviews inventories for obsolescence and any inventories identified as obsolete are reserved or written off. Other Assets At each of March 31, 2018 and December 31, 2017 , other assets were $3.9 million and primarily consisted of deposits for building leases in various locations of $2.0 million and $1.9 million , respectively. Additionally, included in the March 31, 2018 and December 31, 2017 balances was $1.8 million and $1.7 million , respectively, representing a deposit with Mutual Aid Cooperative and Consumer in the Republic of Korea, an organization established by the Republic of Korea’s Fair Trade Commission to protect consumers who participate in network marketing activities. Also included in each of the March 31, 2018 and December 31, 2017 balances was $0.2 million of indefinite lived intangible assets relating to the Manapol® powder trademark. Notes Payable Notes payable were $0.9 million and $0.8 million as of March 31, 2018 and December 31, 2017 , respectively, as a result of funding from a capital financing agreement related to our investment in computer hardware and software and other financing arrangements. At March 31, 2018 , the current portion was $0.9 million . At December 31, 2017 , the current portion was $0.8 million . Other Long-Term Liabilities Other long-term liabilities were $2.9 million and $1.3 million as of March 31, 2018 and December 31, 2017 , respectively. At each of March 31, 2018 and December 31, 2017 , the Company recorded $0.2 million in other long-term liabilities related to uncertain income tax positions (see Note 7, Income Taxes, of the Company’s annual report on Form 10-K for the year ended December 31, 2017 , filed March 26, 2018). Certain operating leases for the Company’s regional office facilities contain a restoration clause that requires the Company to restore the premises to its original condition. At each of March 31, 2018 and December 31, 2017 , accrued restoration costs related to these leases amounted to $0.4 million . At each of March 31, 2018 and December 31, 2017 , the Company also recorded a long-term liability for estimated defined benefit obligation related to a non-U.S. defined benefit plan for its Japan operations of $0.4 million (see Note 9, Employee Benefit Plans , of the Company’s 10-K, filed March 26, 2018). At March 31, 2018 , the Company recorded $1.4 million in other long-term liabilities for lease incentives related to the corporate headquarters operating lease. Revenue Recognition The Company’s revenue is derived from sales of individual products and associate fees. Substantially all of the Company’s product sales are made at published wholesale prices to associates and preferred customers. The Company records revenue net of any sales taxes and records a reserve for expected sales returns based on its historical experience. The Company recognizes revenue from shipped products when control of the product transfers to the customer, thus the performance obligation is satisfied. Corporate-sponsored event revenue is recognized when the event is held. As a result of the 2017 Associate Compensation Plan, which was implemented on July 1, 2017, the Company also collects associate fees, which relate to providing associates with the right to earn commissions, benefits and incentives for an annual period. Revenue from software tools included in the first contractual year is recognized over three months and revenue from associate fees is recognized over 12 months (see Contracts with Multiple Performance Obligations for recognition guidelines). Almost all orders are paid via credit card. Corporate-sponsored event revenue is recognized when the event is held. See Note 9, Segment Information, for disaggregation of revenues by geographic segment and type. The Company collected associate fees within the United States, Canada, South Africa, Japan, Australia, New Zealand, Singapore, Hong Kong and Taiwan since the implementation of the 2017 Associate Compensation Plan. Prior to the change, associates purchased packs that were bundles of products within these respective geographic markets. Deferred Commissions The Company defers commissions on (i) the sales of products shipped but not received by customers by the end of the respective period and (ii) the loyalty program. Deferred commissions are incremental costs and are amortized to expense consistent with how the related revenue is recognized. Deferred commissions were $3.9 million for the year ended December 31, 2017 . Of this balance $2.7 million was amortized to commissions expense for the three months ended March 31, 2018 . At March 31, 2018 , deferred commissions were $3.9 million . Deferred Revenue The Company defers certain components of its revenue. Deferred revenue consisted of: (i) sales of products shipped but not received by customers by the end of the respective period; (ii) revenue from the loyalty program; (iii) prepaid registration fees from customers planning to attend a future corporate-sponsored event, and (iv) prepaid annual associate fees. At December 31, 2017 , the Company’s deferred revenue was $8.6 million . Of this balance, $6.8 million was recognized as revenue for the three months ended March 31, 2018 . At March 31, 2018 , the Company’s deferred revenue was $8.6 million . Mannatech’s customer loyalty program conveys a material right to the customer as it provides the promise to redeem loyalty points for the purchase of products, which is based on earning points through placing consecutive qualified automatic orders. The timing and recognition of loyalty points has not changed with the adoption of Accounting Standard Codification ("ASC") Topic 606, Revenue from Contracts with Customers ("ASC 606"). The Company factors in breakage rates, which is the percentage of the loyalty points that are expected to be forfeited or expire, for purposes of revenue recognition. Breakage rates are estimated based on historical data and can be reasonably and objectively determined. There have not been significant changes for the breakage estimate as a result of adopting ASC 606. The deferred revenue associated with the loyalty program at March 31, 2018 and December 31, 2017 was $6.1 million and $6.4 million , respectively. Loyalty program (in thousands) Loyalty deferred revenue as of January 1, 2017 $ 7,033 Loyalty points forfeited (5,895 ) Loyalty points used (14,316 ) Loyalty points vested 17,836 Loyalty points unvested 1,748 Loyalty deferred revenue as of December 31, 2017 $ 6,406 Loyalty deferred revenue as of January 1, 2018 $ 6,406 Loyalty points forfeited (1,235 ) Loyalty points used (3,565 ) Loyalty points vested 2,808 Loyalty points unvested 1,725 Loyalty deferred revenue as of March 31, 2018 $ 6,139 Sales Refund and Allowances The Company utilizes the expected value method, as set forth by ASC 606, to estimate the sales returns and allowance liability by taking the weighted average of the sales return rates over a rolling six-month period. The Company allocates the total amount recorded within the sales return and allowance liability as a reduction of the overall transaction price for the Company’s product sales. The Company deems the sales refund and allowance liability to be a variable consideration. The method for estimating the sales returns and allowance liability has remained consistent as a result of adopting ASC 606. Historically, sales returns have not materially changed through the years, as the majority of our customers who return their merchandise do so within the first 90 days after the original sale. Sales returns have historically averaged 1.5% or less of our gross sales. For the three months ended March 31, 2018 our sales return reserve consisted of the following (in thousands): Sales reserve as of January 1, 2018 $ 117 Provision related to sales made in current period 340 Adjustment related to sales made in prior periods (24 ) Actual returns or credits related to current period (220 ) Actual returns or credits related to prior periods (93 ) Sales reserve as of March 31, 2018 $ 120 Contracts with Multiple Performance Obligations Orders placed by associates or preferred customers constitute our contracts. Product sales placed in the form of an automatic order contain two performance obligations - a) the sale of the product and b) the loyalty program. For these contracts, the Company accounts for each of these obligations separately as they are each distinct. The transaction price is allocated between the product sale and the loyalty program on a relative standalone selling price basis. Sales placed through a one-time order contain only the first performance obligation noted above - the sale of the product. The Company provides associates with access to a complimentary three -month package for the Success Tracker TM and Mannatech+ online business tools with the first payment of an associate fee. The first payment of an associate fee contains three performance obligations - a) the associate fee, whereby the Company provides an associate with the right to earn commissions, bonuses and incentives for a year, b) three months of complimentary access to utilize the Success Tracker™ online tool and c) three months of complimentary access to utilize the Mannatech+ online business tool. The transaction price is allocated between the three performance obligations on a relative standalone selling price basis. Associates do not have complimentary access to online business tools after the first contractual period. With regards to both of the aforementioned contracts, the Company determines the standalone selling prices based on our overall pricing objectives, taking into consideration market conditions and other factors, including the value of the contracts. Shipping and Handling Costs The Company records inbound freight as a component of inventory and cost of sales. The Company records freight and shipping fees collected from its customers as fulfillment costs. In accordance with ASC 606-10-25-18a, freight and shipping fees are not deemed to be separate performance obligations as these activities occur before the customer receives the product. Commissions and Incentives Associates earn commissions and incentives based on their direct and indirect commissionable net sales over each month of the fiscal year. The Company accrues commissions and incentives when earned by associates and pays commissions on product and pack sales on a monthly basis. Comprehensive Income and Accumulated Other Comprehensive Income Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources and includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. The Company’s comprehensive income consists of the Company’s net income, foreign currency translation adjustments from its Japan, Republic of Korea, Taiwan, Denmark, Norway, Sweden, Colombia, Mexico and China operations, remeasurement of intercompany balances classified as equity in its Korea, Mexico and Cyprus operations, and changes in the pension obligation for its Japanese employees. Recently Adopted Accounting Pronouncements The Company adopted ASU 2014-09, Revenue from Contracts with Customer s, as of January 1, 2018. In May 2014, the Financial Accounting Standards Board ("FASB") issued ASU 2014-09, Revenue from Contracts with Customer s. This new standard requires companies to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which a company expects to be entitled in exchange for those goods or services. Under the new standard, revenue is recognized when a customer obtains control of a good or service. The standard allows for two transition methods - entities can either apply the new standard (i) retrospectively to each prior reporting period presented or (ii) retrospectively with the cumulative effect of initially applying the standard recognized at the date of initial adoption. In July 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customer s, which deferred the effective date by one year to December 15, 2017 for fiscal years, and interim periods within those fiscal years, beginning after that date. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers, Principal versus Agent Considerations (Reporting Revenue versus Net) , in April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customer s , identifying Performance Obligations and Licensing , and in May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customer s, Nar row-Scope Improvements and Practical Expedients , which provide additional clarification on certain topics addressed in ASU 2014-09. ASU 2016-08, ASU 2016-10, and ASU 2016-12 follow the same implementation guidelines as ASU 2014-09 and ASU 2015-14. All of these aforementioned ASUs have been codified under ASC 606, Revenue from Contracts with Customers. We adopted this standard on January 1, 2018 utilizing the modified retrospective approach applied to open contracts at the date of initial application. As the cumulative effect of applying the modified retrospective approach was immaterial, no adjustment was recorded to the opening balance of retained earnings. The timing of revenue recognition for our various revenue streams was not materially impacted by the adoption of this standard. The Company believes its business processes, systems, and controls are appropriate to support recognition and disclosure under ASC 606. In addition, the adoption has led to increased footnote disclosures. The overall financial impact of adopting this standard did not have a material impact on our consolidated financial statements, financial condition, changes in financial condition or results of operations. The Company adopted ASU 2016-18, Statement of Cash Flows, Restricted Cash (Topic 230) , during the first quarter of 2018. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows, Restricted Cash (Topic 230), which addresses the diversity in the classification and presentation of changes in restricted cash on the statement of cash flows. The amendment requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and restricted cash. Restricted cash amounts are to be included with cash and cash equivalents when reconciling the beginning and ending amounts of cash on the statement of cash flows. The guidance is effective for annual periods beginning after December 15, 2017. Early adoption is permitted. The adoption of this ASU did not have a material impact on our financial statements, financial condition, changes in financial condition or results of operations. The Company adopted ASU 2017-09, Compensation, Stock Compensation (Topic 718), during the first quarter of 2018. In May 2017, the FASB issued ASU 2017-09, Compensation, Stock Compensation (Topic 718), to clarify which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The new standard is required to be applied prospectively. The guidance was effective January 1, 2018, and the adoption of this ASU did not have a material impact on our financial statements, financial condition, changes in financial condition or results of operations. Accounting Pronouncements Issued But Not Yet Effective In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) . Under ASU 2016-02, an entity will be required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. ASU 2016-02 offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. For public companies, ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, and requires a modified retrospective adoption, with early adoption permitted. Management is currently in the initial stages of evaluating the future impact of ASU 2016-02 on its consolidated financial position, results of operations and cash flows. The overall financial impact of adopting this standard is unknown at this time. In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (Topic 220), which amended its standard on comprehensive income to provide an option for an entity to reclassify the stranded tax effects of the Tax Cuts and Jobs Act that was passed in December of 2017 (the "TCJA") from accumulated other comprehensive income (AOCI) directly to retained earnings. The stranded tax effects result from the remeasurement of deferred tax assets and liabilities which were originally recorded in comprehensive income but whose remeasurement is reflected in the income statement. This is a one-time amendment applicable only to the changes resulting from the TCJA. The standard will be effective for us on January 1, 2019, and may be reflected retroactively to any period in which the impacts of the TCJA are recognized. The standard permits early adoption for any financial statements that have not been released as of the date of the revised standard. The overall financial impact of adopting this standard is unknown at this time. Other recently issued accounting pronouncements did not or are not believed by management to have a material impact on the Company’s present or future financial statements. |
INVENTORIES
INVENTORIES | 3 Months Ended |
Mar. 31, 2018 | |
Inventory Disclosure [Abstract] | |
INVENTORIES | INVENTORIES Inventories consist of raw materials, finished goods, and promotional materials. The Company provides an allowance for any slow-moving or obsolete inventories. Inventories at March 31, 2018 and December 31, 2017 , consisted of the following (in thousands) : March 31, 2018 December 31, 2017 Raw materials $ 869 $ 879 Finished goods 8,745 9,072 Inventory reserves for obsolescence (566 ) (566 ) Total $ 9,048 $ 9,385 |
INCOME TAXES
INCOME TAXES | 3 Months Ended |
Mar. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES For the three months ended March 31, 2018 and 2017, the Company’s effective tax rate was 53.7% and 36.5% , respectively, and was determined based on the estimated annual effective income tax rate. The effective tax rate for the three months ended March 31, 2018 generated a tax benefit due to loss before income tax. Items increasing the effective tax rate are add-backs from foreign loss positions in certain jurisdictions and the impact of global intangible low-tax income (“GILTI”) as a result of the TCJA. The effective tax rate for the three months ended March 31, 2017 was higher than what would have been expected if the U.S. federal statutory rate were applied to income before taxes due to add-backs from foreign loss positions in certain jurisdictions and “Subpart F income” resulting from controlled foreign corporation operations. On December 22, 2017, the SEC staff issued Staff Accounting Bulletin 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”), which provides guidance on accounting for the impact of the TCJA, in effect allowing an entity to use a methodology similar to the measurement period in a business combination. Pursuant to the disclosure provisions of SAB 118, as of March 31, 2018, the Company has not completed its accounting for the tax effects of the TCJA. The Company recorded a reasonable estimate of the impact from the TCJA, but is still analyzing the TCJA and refining our calculations. Additionally, future guidance from the Internal Revenue Service, SEC, or the FASB could result in changes to our accounting for the tax effects of the TCJA. |
EARNINGS (LOSS) PER SHARE
EARNINGS (LOSS) PER SHARE | 3 Months Ended |
Mar. 31, 2018 | |
Earnings Per Share [Abstract] | |
EARNINGS (LOSS) PER SHARE | EARNINGS (LOSS) PER SHARE The Company calculates basic Earnings per Share ("EPS") by dividing net income (loss) by the weighted-average number of common shares outstanding for the period. Diluted EPS also reflects the potential dilution that could occur if common stock were issued for awards outstanding under the Mannatech, Incorporated 2017 Stock Incentive Plan. For each of the three months ended March 31, 2018 and 2017 , shares of the Company's common stock subject to options were excluded from the diluted EPS calculation as their effect would have been antidilutive. In determining the potential dilution effect of outstanding stock options during each of the three months ended March 31, 2018 and 2017 , the Company used the quarterly average common stock closing price of $14.68 and $18.42 per share, respectively. The Company reported a net loss for each of the three months ended March 31, 2018 and 2017 . |
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION | 3 Months Ended |
Mar. 31, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
STOCK-BASED COMPENSATION | STOCK-BASED COMPENSATION The Company currently has one active stock-based compensation plan, the Mannatech, Incorporated 2017 Stock Incentive Plan (the "2017 Plan"), which was adopted by the Company’s Board of Directors on April 17, 2017 and was approved by its shareholders on June 8, 2017. The 2017 Plan supersedes the Mannatech, Incorporated 2008 Stock Incentive Plan, as amended, which was set to expire on February 20, 2018. The Board has reserved a maximum of 250,000 shares of our common stock that may be issued under the 2017 Plan, consisting of 181,674 newly reserved shares and 68,326 shares that remained available for issuance under the 2008 Plan (subject to adjustments for stock splits, stock dividends or other changes in corporate capitalization). As of March 31, 2018 , the Company had a total of 224,154 shares available for grant under the 2017 Plan, which expires on April 16, 2027. The 2008 Plan provided, and the 2017 Plan provides, for grants of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance stock and performance stock units to our employees, board members, and consultants. However, only employees of the Company and its corporate subsidiaries are eligible to receive incentive stock options. The exercise price per share for all stock options will be no less than the market value of a share of common stock on the date of grant. Any incentive stock option granted to an employee owning more than 10% of our common stock will have an exercise price of no less than 110% of our common stock’s market value on the grant date. The majority of stock options vest over two or three years, and generally are granted with a term of ten years, or five years in the case of an incentive option granted to an employee who owns more than 10% of our common stock. A summary of changes in stock options outstanding during the three months ended March 31, 2018 and 2017 are as follows: Three months ended March 31, 2018 2017 Total gross compensation expense $ 36 $ 77 Total tax benefit associated with compensation expense 7 13 Total net compensation expense $ 29 $ 64 As of March 31, 2018 , the Company expects to record compensation expense in the future as follows (in thousands) : Nine months ending December 31, 2018 Year ending December 31, 2019 2020 2021 Total gross unrecognized compensation expense $ 85 $ 38 $ — $ — Tax benefit associated with unrecognized compensation expense 12 3 — — Total net unrecognized compensation expense $ 73 $ 35 $ — $ — |
SHAREHOLDERS' EQUITY
SHAREHOLDERS' EQUITY | 3 Months Ended |
Mar. 31, 2018 | |
Equity [Abstract] | |
SHAREHOLDERS' EQUITY | SHAREHOLDERS’ EQUITY Accumulated Other Comprehensive Income Accumulated other comprehensive income, displayed in the Consolidated Statement of Shareholders’ Equity, represents net income plus the results of certain shareholders’ equity changes not reflected in the Consolidated Statements of Operations, such as foreign currency translation and certain pension and post-retirement benefit obligations. The after-tax components of accumulated other comprehensive income, are as follows (in thousands) : Foreign Currency Translation Pension Postretirement Benefit Obligation Accumulated Other Comprehensive Income, Net Balance as of December 31, 2017 $ 5,703 $ 281 $ 5,984 Current-period change (1) 334 — 334 Balance as of March 31, 2018 $ 6,037 $ 281 $ 6,318 (1) No amounts reclassified from accumulated other comprehensive income. Dividends On March 12, 2018, the Board of Directors declared a dividend of $0.125 per share that was paid on March 28, 2018 to shareholders of record on March 21, 2018. |
LITIGATION
LITIGATION | 3 Months Ended |
Mar. 31, 2018 | |
LITIGATION [Abstract] | |
LITIGATION | LITIGATION Insured Litigation - Personal Injury Ralph Pinkston v. Cornerstone Technologies, LLC d/b/a Cornerstone Show Foundation, Mannatech Inc., and Anatole Partners III, LLC , Case No. DC-17-13494 (192nd Dist. Ct., Dallas, Co., Tex) On October 13, 2017, the Company’s registered agent received service of process of the above-captioned matter. Ralph Pinkston (the “Plaintiff”) is a truck driver who is alleging that he suffered injuries to his foot while unloading audio-visual equipment owned by Defendant Cornerstone from his truck on to the dock at Defendant Anatole’s hotel (the “Hotel”) on the morning of April 5, 2016. The Company held its 2016 MannaFest event at the Hotel from April 6, 2016 to April 10, 2016. Defendant Cornerstone provided production services to the Company for the event. The Plaintiff alleges that his injuries were due to the negligence of the Company and the other defendants. The Plaintiff is seeking damages in excess of $200,000 . The Company submitted this matter to its insurance carrier and retained approved outside counsel. The parties are engaged in the discovery process. It is not possible at this time to predict whether the Company will incur any liability, or to estimate the ranges of damages, if any, which may be incurred in connection with this matter; however, the Company believes it has a valid defense and will vigorously defend this claim. Administrative Proceeding Mannatech Korea, Ltd. v. Busan Custom Office , Busan District Court, Korea On or before April 12, 2015, Mannatech Korea, Ltd. filed a suit against the Busan Custom Office (“BCO”) to challenge BCO’s method of calculation regarding its assessment notice issued on July 11, 2013. The assessment notice included an audit of the Company’s imported goods covering fiscal years 2008 through 2012 and required the Company to pay $1.0 million for this assessment, all of which was paid in January 2014. Both parties submitted a response to the Court’s inquiry on January 15, 2016. The final hearing for the case was held on May 26, 2016 where each party presented their respective arguments. The Court set the decision hearing on October 27, 2016, and the Court decided the case in the Company’s favor. However, on November 18, 2016, BCO filed an appeal to the Busan High Court. The first hearing occurred on March 31, 2017, and the second hearing occurred on April 21, 2017. The final hearing was held on June 2, 2017. The Court issued its decision on June 30, 2017 in favor of the BCO. The Company appealed this decision on August 24, 2017. The Company anticipates a final decision on the appeal by the first quarter of 2019. This matter remains open. Patent Litigation Mannatech, Incorporated v. Wellness Quest, LLC and Harley Reginald McDaniel, Case No. 3:14-cv-2497, U.S. District Court, for the Northern District of Texas, Dallas Division On July 11, 2014 the Company filed a patent infringement lawsuit against Wellness Quest, LLC and Dr. H. Reginald McDaniel (“Defendants”) alleging the Defendants infringe United States Patent Nos. 7,157,431 and 7,202,220, both entitled “Compositions of Plant Carbohydrates as Dietary Supplements,” (the “Patents”) and seeking to stop their manufacture, offer, and sale of infringing glyconutritional dietary supplement products. Mediation on this matter was held on April 24, 2015 and a settlement was not reached. On November 5, 2015, the Court issued an Order accepting Defendant’s stipulation of infringement under the Court’s claim interpretation and granted the Company’s partial motion for summary judgment and issued a permanent injunction against Defendants’ infringement of the Patents. The Court stayed the permanent injunction until the conclusion of Defendants’ appeal to the U.S. Court of Appeals for the Federal Circuit (the “Court of Appeals”). On August 5, 2016, the Court of Appeals issued a per curium opinion affirming the trial court’s judgment in favor of the Company. On August 10, 2016, the Company filed a motion to lift the stay of permanent injunction previously issued by the trial court. On August 24, 2016, the Company received confirmation from its counsel that Defendants changed the formulation of the infringing product to a formulation proposed by the Company. On October 18, 2016, the Court entered an order lifting the stay and putting the permanent injunction back into full effect. On March 31, 2017, the Court entered the Agreed Scheduling Order for trial on damages and determination of willfulness. On June 22, 2017, bankruptcy counsel for Defendant Dr. McDaniel filed a Suggestion of Bankruptcy with the Court notifying the Court and the Company that on June 20, 2017, Defendant Dr. McDaniel filed a Chapter 7 Bankruptcy in the United States Bankruptcy Court for the Northern District of Texas in Cause No. 17-42560. This case is automatically stayed, which under the Bankruptcy Code, prevents any type of collection to continue including litigation against the debtor. Defendant Dr. McDaniel asserts that the stay includes Defendant Wellness Quest as it is wholly owned by Defendant Dr. McDaniel. Although stayed, the case has not been dismissed. This matter remains open. In Re: Harley Reginald McDaniel, Case No. 17-42560 (U.S. Bankruptcy Court for the Northern District of Texas) On June 22, 2017, the Company received notice that on June 20, 2017, Dr. H. Reginald McDaniel (the “Debtor”) filed a Chapter 7 Bankruptcy in the United States Bankruptcy Court for the Northern District of Texas. The Company is the largest creditor based on the Company’s judgment against the Debtor in the patent litigation styled, Mannatech, Incorporated v. Wellness Quest, LLC and Harley Reginald McDaniel . The Debtor asserts that the value of the debt is $700,000 . The Company engaged bankruptcy counsel. The first meeting of creditors was held on August 8, 2017. On August 24, 2017, the Chapter 7 Trustee and the Company each filed objections to certain exemptions asserted by the Debtor. On August 25, 2017, the U.S. Trustee filed a motion seeking dismissal of the case. On September 14, 2017, the Company filed its response opposing the U.S. Trustee’s motion on the grounds that dismissal would be contrary to the best interests of the creditors. A hearing on the motion to dismiss was held on September 20, 2017. On October 12, 2017, the U.S. Trustee stipulated to dismiss its dismissal motion. On November 7, 2017, the Company filed a proof of claim in the amount of $700,000 . On November 27, 2017, the Company commenced an adversary proceeding in the case styled Mannatech, Inc. v. Harley Reginald McDaniel, Sr. , Adversary Number 17-04153 against the Debtor seeking a declaration that the indebtedness to Mannatech is non-dischargeable. On December 27, 2017, the Chapter 7 Trustee, the Debtor, and the Company negotiated a Settlement and Compromise Agreement and on January 2, 2018, the Chapter 7 Trustee filed a motion seeking the Court’s approval of that agreement. On January 31, 2018, the Court entered an Order granting the Trustee’s motion. On March 9, 2018, the Company dismissed the adversarial case against the Debtor. On March 15, 2018, the Company received notice that the Chapter 7 Trustee submitted the Final Report to the U.S. Trustee’s office for approval. The U.S. Trustee filed the Notice of the Trustee’s Final Report and Application for Compensation with the Court on April 24, 2018. Under the Final Report, the Company is scheduled to receive $62,976.69 for its allowed, general unsecured claim. Objections to the Final Report or the Application for Compensation must be filed with Court and served on the U.S. Trustee within 30 days of the date of the notice. If no objection to the Final Report is filed and served, the U.S. Trustee may pay proceeds contemplated by the Final Report without further order of the Court. The Company is currently assessing how to proceed with the patent infringement case against Wellness Quest. This matter remains open. Trademark Opposition - U.S. Patent and Trademark Office United States Trademark Opposition No. 91221493, Shaklee Corporation v. Mannatech, Incorporated re: UTH On April 15, 2015, the Company received notice that Shaklee Corporation (“Shaklee”) filed a Notice of Opposition to the Company’s trademark application for UTH (stylized as Û th ) with the USPTO. On May 19, 2015, the Company filed an answer to the opposition and also filed a counterclaim seeking to cancel Shaklee’s registration of its YOUTH mark. On March 28, 2017, the Trademark Trial and Appeal Board (the "TTAB") ruled on the 56(d) Motion, granting the Company’s motion in part to oblige Shaklee to answer the Company’s request for discovery related to Shaklee’s use or non-use of the YOUTH mark. The Company took the deposition of Shaklee’s designated witness on May 31, 2017. On June 29, 2017, the Company filed Applicant’s Opposition to Opposer’s Motion for Summary Judgment on Applicant’s Counterclaim for Abandonment and Applicant’s Cross Motion for Summary Judgment on its Counterclaim for Abandonment. Shaklee’s reply in support of their Motion for Summary Judgement and Response to the Company’s Counterclaim was filed on August 3, 2017. Each party’s respective motions for summary judgment were denied by the TTAB. The TTAB set April 21, 2018 as the due date for expert disclosures and set May 21, 2018 as the closing date for discovery. Shaklee filed a Motion to Quash on April 13, 2018 and the Company filed its response on April 28, 2018. It is not possible at this time to predict the outcome of this office action or whether the Company will incur any liability, or to estimate the ranges of damages, if any, which may be incurred in connection with this matter. However, the Company believes it has a valid defense and will vigorously defend this claim. This matter remains open. Litigation in General The Company has incurred several claims in the normal course of business. The Company believes such claims can be resolved without any material adverse effect on its consolidated financial position, results of operations, or cash flows. The Company maintains certain liability insurance; however, certain costs of defending lawsuits are not covered by or only partially covered by its insurance policies, including claims that are below insurance deductibles. Additionally, insurance carriers could refuse to cover certain claims, in whole or in part. The Company accrues costs to defend itself from litigation as they are incurred or as they become determinable. The outcome of litigation is uncertain, and despite management’s views of the merits of any litigation, or the reasonableness of the Company’s estimates and reserves, the Company’s financial statements could nonetheless be materially affected by an adverse judgment. The Company believes it has adequately reserved for the contingencies arising from current legal matters where an outcome was deemed to be probable, and the loss amount could be reasonably estimated. |
FAIR VALUE
FAIR VALUE | 3 Months Ended |
Mar. 31, 2018 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE | FAIR VALUE The Company utilizes fair value measurements to record fair value adjustments to certain financial assets and to determine fair value disclosures. Fair Value Measurements and Disclosure (Topic 820) of the FASB establishes a fair value hierarchy that requires the use of observable market data, when available, and prioritizes the inputs to valuation techniques used to measure fair value in the following categories: • Level 1 – Quoted unadjusted prices for identical instruments in active markets. • Level 2 – Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations in which all observable inputs and significant value drivers are observable in active markets. • Level 3 – Model-derived valuations in which one or more significant inputs or significant value drivers are unobservable, including assumptions developed by the Company. The primary objective of the Company’s investment activities is to preserve principal while maximizing yields without significantly increasing risk. The investment instruments held by the Company are money market funds and interest bearing deposits for which quoted market prices are readily available. The Company considers these highly liquid investments to be cash equivalents. These investments are classified within Level 1 of the fair value hierarchy because they are valued based on quoted market prices in active markets. The Company does not have any material financial liabilities that were required to be measured at fair value on a recurring basis at March 31, 2018 . The table below presents the recorded amount of financial assets measured at fair value (in thousands) on a recurring basis as of March 31, 2018 and December 31, 2017 . March 31, 2018 Level 1 Level 2 Level 3 Total Assets Money Market Funds – Fidelity, US $ — $ — $ — $ — Interest bearing deposits – various banks 25,246 — — 25,246 Total assets $ 25,246 $ — $ — $ 25,246 Amounts included in: Cash and cash equivalents $ 18,173 $ — $ — $ 18,173 Restricted cash 742 — — 742 Long-term restricted cash 6,331 — — 6,331 Total $ 25,246 $ — $ — $ 25,246 December 31, 2017 Level 1 Level 2 Level 3 Total Assets Money Market Funds – Fidelity, US $ — $ — $ — $ — Interest bearing deposits – various banks 23,695 — — 23,695 Total assets $ 23,695 $ — $ — $ 23,695 Amounts included in: Cash and cash equivalents $ 16,651 $ — $ — $ 16,651 Restricted cash 741 — — 741 Long-term restricted cash 6,303 — — 6,303 Total $ 23,695 $ — $ — $ 23,695 |
SEGMENT INFORMATION
SEGMENT INFORMATION | 3 Months Ended |
Mar. 31, 2018 | |
Segment Reporting [Abstract] | |
SEGMENT INFORMATION | SEGMENT INFORMATION The Company's sole reporting segment is one where we sell proprietary nutritional supplements, skin care and anti-aging products, and weight-management and fitness products through network marketing distribution channels operating in twenty-five countries. Each of the business units sells similar packs (with the exception of the United States, Canada, South Africa, Japan, Australia, New Zealand, Singapore, Hong Kong, and Taiwan where packs have been replaced with associate fees, see Note 1, Organization and Summary of Significant Accounting Policies ) and products and possesses similar economic characteristics, such as selling prices and gross margins. In each country, the Company markets its products and pays commissions and incentives in similar market environments. The Company’s management reviews its financial information by country and focuses its internal reporting and analysis of revenues by pack sales and associate fees and product sales. The Company sells its products through its independent associates who occupy positions in our network and distribute products through similar distribution channels in each country. No single independent associate has ever accounted for more than 10% of the Company’s consolidated net sales. The Company also operates a non-direct selling business in mainland China. Our subsidiary in China, Meitai, is operating as a traditional retailer under a cross-border e-commerce model. Meitai cannot legally conduct a direct selling business in China unless it acquires a direct selling license in China. The Company operates facilities in fourteen countries and sells product in twenty-six countries around the world. These facilities are located in the United States, Canada, Switzerland, Australia, the United Kingdom, Japan, the Republic of Korea (South Korea), Taiwan, South Africa, Mexico, Hong Kong, Singapore, Colombia and China. Each facility services different geographic areas. We currently sell our products in three regions: (i) the Americas (the United States, Canada, Colombia and Mexico); (ii) EMEA (Austria, the Czech Republic, Denmark, Estonia, Finland, Germany, the Republic of Ireland, Namibia, the Netherlands, Norway, South Africa, Spain, Sweden and the United Kingdom); and (iii) Asia/Pacific (Australia, Japan, New Zealand, the Republic of Korea, Singapore, Taiwan, Hong Kong and China). Consolidated net sales shipped to customers in these regions, along with pack and product information for the three months ended March 31, were as follows (in millions, except percentages) : Three months Region 2018 2017 Americas $ 13.7 33.1 % $ 15.5 38.2 % Asia/Pacific 24.2 58.4 % 21.9 53.9 % EMEA 3.5 8.5 % 3.2 7.9 % Totals $ 41.4 100.0 % $ 40.6 100.0 % Three months 2018 2017 Consolidated product sales $ 41.0 $ 35.0 Consolidated pack sales and associate fees (a) 0.5 5.7 Consolidated other (0.1 ) (0.1 ) Consolidated total net sales $ 41.4 $ 40.6 (a) Coincident with the introduction of the 2017 Associate Compensation Plan, which was implemented on July 1, 2017, the Company collects associate fees, which each independent associate pays to the Company annually in order to be entitled to earn commissions, benefits and incentives for that year. The Company collected associate fees within the United States, Canada, South Africa, Japan, Australia, New Zealand, Singapore, Hong Kong, and Taiwan since the implementation of 2017 Associate Compensation Plan. Prior to the change, independent associates purchased packs that were bundles of products within these respective geographic markets. Since implementing the 2017 Associate Compensation Plan, total associate fees represented an immaterial amount of total sales. Long-lived assets, which include property and equipment and construction in process for the Company and its subsidiaries, as of March 31, 2018 and December 31, 2017 , reside in the following regions, as follows (in millions) : Region March 31, 2018 December 31, 2017 Americas $ 4.1 $ 2.9 Asia/Pacific 1.3 1.3 EMEA 0.1 0.1 Total $ 5.5 $ 4.3 Inventory balances, which consist of raw materials, work in process, finished goods, and promotional materials, as offset by the allowance for slow moving or obsolete inventories, reside in the following regions (in millions) : Region March 31, 2018 December 31, 2017 Americas $ 3.7 $ 3.5 Asia/Pacific 4.0 4.5 EMEA 1.3 1.4 Total $ 9.0 $ 9.4 |
ORGANIZATION AND SUMMARY OF S17
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements and footnotes include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. |
Use of Estimates | Use of Estimates The preparation of the Company’s consolidated financial statements in accordance with GAAP requires the use of estimates that affect the reported value of assets, liabilities, revenues and expenses. These estimates are based on historical experience and various other factors. The Company continually evaluates the information used to make these estimates as the business and economic environment changes. Historically, actual results have not varied materially from the Company’s estimates and the Company does not currently anticipate a significant change in its assumptions related to these estimates. However, actual results may differ from these estimates under different assumptions or conditions. The use of estimates is pervasive throughout the consolidated financial statements, but the accounting policies and estimates considered the most significant are described in this note to the consolidated financial statements, Organization and Summary of Significant Accounting Policies . |
Cash and Cash Equivalents | Cash, Cash Equivalents, and Restricted Cash The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. The Company includes in its cash and cash equivalents credit card receivables due from its credit card processor, as the cash proceeds from credit card receivables are received within 24 to 72 hours. As of March 31, 2018 and December 31, 2017 , credit card receivables were $2.7 million and $2.0 million , respectively. As of March 31, 2018 and December 31, 2017 , cash and cash equivalents held in bank accounts in foreign countries totaled $33.8 million and $30.6 million , respectively. The Company invests cash in liquid instruments, such as money market funds and interest bearing deposits. The Company also holds cash in high quality financial institutions and does not believe it has an excessive exposure to credit concentration risk. |
Restricted Cash | The Company is required to restrict cash for: (i) direct selling insurance premiums and credit card sales in the Republic of Korea; (ii) reserve on credit card sales in the United States and Canada; and (iii) the Australia building lease collateral. As of each of March 31, 2018 and December 31, 2017 , our total restricted cash was $9.1 million . |
Accounts Receivable | Accounts Receivable Accounts receivable are carried at their estimated collectible amounts. Receivables are created upon shipment of an order if the credit card payment is rejected or does not match the order total. As of each of March 31, 2018 and December 31, 2017 , receivables consisted primarily of amounts due from preferred customers and associates. As of March 31, 2018 and December 31, 2017 , the Company's accounts receivable balance (net of allowance) was $0.4 million and $0.3 million , respectively. The Company periodically evaluates its receivables for collectability based on historical experience, recent account activities, and the length of time receivables are past due and writes-off receivables when they become uncollectible. As of each of March 31, 2018 and December 31, 2017 , the Company held an allowance for doubtful accounts of $0.6 million . |
Inventories | Inventories Inventories consist of raw materials, finished goods, and promotional materials that are stated at the lower of cost (using standard costs that approximate average costs) or net realizable value. The Company periodically reviews inventories for obsolescence and any inventories identified as obsolete are reserved or written off. |
Other Assets | Other Assets At each of March 31, 2018 and December 31, 2017 , other assets were $3.9 million and primarily consisted of deposits for building leases in various locations of $2.0 million and $1.9 million , respectively. Additionally, included in the March 31, 2018 and December 31, 2017 balances was $1.8 million and $1.7 million , respectively, representing a deposit with Mutual Aid Cooperative and Consumer in the Republic of Korea, an organization established by the Republic of Korea’s Fair Trade Commission to protect consumers who participate in network marketing activities. Also included in each of the March 31, 2018 and December 31, 2017 balances was $0.2 million of indefinite lived intangible assets relating to the Manapol® powder trademark. |
Notes Payable | Notes Payable Notes payable were $0.9 million and $0.8 million as of March 31, 2018 and December 31, 2017 , respectively, as a result of funding from a capital financing agreement related to our investment in computer hardware and software and other financing arrangements. At March 31, 2018 , the current portion was $0.9 million . At December 31, 2017 , the current portion was $0.8 million |
Other Long-Term Liabilities | Other Long-Term Liabilities Other long-term liabilities were $2.9 million and $1.3 million as of March 31, 2018 and December 31, 2017 , respectively. At each of March 31, 2018 and December 31, 2017 , the Company recorded $0.2 million in other long-term liabilities related to uncertain income tax positions (see Note 7, Income Taxes, of the Company’s annual report on Form 10-K for the year ended December 31, 2017 , filed March 26, 2018). Certain operating leases for the Company’s regional office facilities contain a restoration clause that requires the Company to restore the premises to its original condition. At each of March 31, 2018 and December 31, 2017 , accrued restoration costs related to these leases amounted to $0.4 million . At each of March 31, 2018 and December 31, 2017 , the Company also recorded a long-term liability for estimated defined benefit obligation related to a non-U.S. defined benefit plan for its Japan operations of $0.4 million (see Note 9, Employee Benefit Plans , of the Company’s 10-K, filed March 26, 2018). |
Revenue Recognition and Deferred Commissions | Revenue Recognition The Company’s revenue is derived from sales of individual products and associate fees. Substantially all of the Company’s product sales are made at published wholesale prices to associates and preferred customers. The Company records revenue net of any sales taxes and records a reserve for expected sales returns based on its historical experience. The Company recognizes revenue from shipped products when control of the product transfers to the customer, thus the performance obligation is satisfied. Corporate-sponsored event revenue is recognized when the event is held. As a result of the 2017 Associate Compensation Plan, which was implemented on July 1, 2017, the Company also collects associate fees, which relate to providing associates with the right to earn commissions, benefits and incentives for an annual period. Revenue from software tools included in the first contractual year is recognized over three months and revenue from associate fees is recognized over 12 months (see Contracts with Multiple Performance Obligations for recognition guidelines). Almost all orders are paid via credit card. Corporate-sponsored event revenue is recognized when the event is held. See Note 9, Segment Information, for disaggregation of revenues by geographic segment and type. The Company collected associate fees within the United States, Canada, South Africa, Japan, Australia, New Zealand, Singapore, Hong Kong and Taiwan since the implementation of the 2017 Associate Compensation Plan. Prior to the change, associates purchased packs that were bundles of products within these respective geographic markets. Deferred Commissions The Company defers commissions on (i) the sales of products shipped but not received by customers by the end of the respective period and (ii) the loyalty program. Deferred commissions are incremental costs and are amortized to expense consistent with how the related revenue is recognized. Deferred commissions were $3.9 million for the year ended December 31, 2017 . Of this balance $2.7 million was amortized to commissions expense for the three months ended March 31, 2018 . At March 31, 2018 , deferred commissions were $3.9 million . Deferred Revenue The Company defers certain components of its revenue. Deferred revenue consisted of: (i) sales of products shipped but not received by customers by the end of the respective period; (ii) revenue from the loyalty program; (iii) prepaid registration fees from customers planning to attend a future corporate-sponsored event, and (iv) prepaid annual associate fees. At December 31, 2017 , the Company’s deferred revenue was $8.6 million . Of this balance, $6.8 million was recognized as revenue for the three months ended March 31, 2018 . At March 31, 2018 , the Company’s deferred revenue was $8.6 million . Mannatech’s customer loyalty program conveys a material right to the customer as it provides the promise to redeem loyalty points for the purchase of products, which is based on earning points through placing consecutive qualified automatic orders. The timing and recognition of loyalty points has not changed with the adoption of Accounting Standard Codification ("ASC") Topic 606, Revenue from Contracts with Customers ("ASC 606"). The Company factors in breakage rates, which is the percentage of the loyalty points that are expected to be forfeited or expire, for purposes of revenue recognition. Breakage rates are estimated based on historical data and can be reasonably and objectively determined. There have not been significant changes for the breakage estimate as a result of adopting ASC 606. The deferred revenue associated with the loyalty program at March 31, 2018 and December 31, 2017 was $6.1 million and $6.4 million , respectively. Loyalty program (in thousands) Loyalty deferred revenue as of January 1, 2017 $ 7,033 Loyalty points forfeited (5,895 ) Loyalty points used (14,316 ) Loyalty points vested 17,836 Loyalty points unvested 1,748 Loyalty deferred revenue as of December 31, 2017 $ 6,406 Loyalty deferred revenue as of January 1, 2018 $ 6,406 Loyalty points forfeited (1,235 ) Loyalty points used (3,565 ) Loyalty points vested 2,808 Loyalty points unvested 1,725 Loyalty deferred revenue as of March 31, 2018 $ 6,139 Sales Refund and Allowances The Company utilizes the expected value method, as set forth by ASC 606, to estimate the sales returns and allowance liability by taking the weighted average of the sales return rates over a rolling six-month period. The Company allocates the total amount recorded within the sales return and allowance liability as a reduction of the overall transaction price for the Company’s product sales. The Company deems the sales refund and allowance liability to be a variable consideration. The method for estimating the sales returns and allowance liability has remained consistent as a result of adopting ASC 606. Historically, sales returns have not materially changed through the years, as the majority of our customers who return their merchandise do so within the first 90 days after the original sale. Sales returns have historically averaged 1.5% or less of our gross sales. For the three months ended March 31, 2018 our sales return reserve consisted of the following (in thousands): Sales reserve as of January 1, 2018 $ 117 Provision related to sales made in current period 340 Adjustment related to sales made in prior periods (24 ) Actual returns or credits related to current period (220 ) Actual returns or credits related to prior periods (93 ) Sales reserve as of March 31, 2018 $ 120 Contracts with Multiple Performance Obligations Orders placed by associates or preferred customers constitute our contracts. Product sales placed in the form of an automatic order contain two performance obligations - a) the sale of the product and b) the loyalty program. For these contracts, the Company accounts for each of these obligations separately as they are each distinct. The transaction price is allocated between the product sale and the loyalty program on a relative standalone selling price basis. Sales placed through a one-time order contain only the first performance obligation noted above - the sale of the product. The Company provides associates with access to a complimentary three -month package for the Success Tracker TM and Mannatech+ online business tools with the first payment of an associate fee. The first payment of an associate fee contains three performance obligations - a) the associate fee, whereby the Company provides an associate with the right to earn commissions, bonuses and incentives for a year, b) three months of complimentary access to utilize the Success Tracker™ online tool and c) three months of complimentary access to utilize the Mannatech+ online business tool. The transaction price is allocated between the three performance obligations on a relative standalone selling price basis. Associates do not have complimentary access to online business tools after the first contractual period. With regards to both of the aforementioned contracts, the Company determines the standalone selling prices based on our overall pricing objectives, taking into consideration market conditions and other factors, including the value of the contracts. |
Shipping and Handling Costs | Shipping and Handling Costs The Company records inbound freight as a component of inventory and cost of sales. The Company records freight and shipping fees collected from its customers as fulfillment costs. In accordance with ASC 606-10-25-18a, freight and shipping fees are not deemed to be separate performance obligations as these activities occur before the customer receives the product. |
Commissions and Incentives | Commissions and Incentives Associates earn commissions and incentives based on their direct and indirect commissionable net sales over each month of the fiscal year. The Company accrues commissions and incentives when earned by associates and pays commissions on product and pack sales on a monthly basis. |
Comprehensive Income and Accumulated Other Comprehensive Income | Comprehensive Income and Accumulated Other Comprehensive Income Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources and includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. The Company’s comprehensive income consists of the Company’s net income, foreign currency translation adjustments from its Japan, Republic of Korea, Taiwan, Denmark, Norway, Sweden, Colombia, Mexico and China operations, remeasurement of intercompany balances classified as equity in its Korea, Mexico and Cyprus operations, and changes in the pension obligation for its Japanese employees. |
Recently Adopted and Issued But Not Yet Effective Accounting Pronouncements | Recently Adopted Accounting Pronouncements The Company adopted ASU 2014-09, Revenue from Contracts with Customer s, as of January 1, 2018. In May 2014, the Financial Accounting Standards Board ("FASB") issued ASU 2014-09, Revenue from Contracts with Customer s. This new standard requires companies to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which a company expects to be entitled in exchange for those goods or services. Under the new standard, revenue is recognized when a customer obtains control of a good or service. The standard allows for two transition methods - entities can either apply the new standard (i) retrospectively to each prior reporting period presented or (ii) retrospectively with the cumulative effect of initially applying the standard recognized at the date of initial adoption. In July 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customer s, which deferred the effective date by one year to December 15, 2017 for fiscal years, and interim periods within those fiscal years, beginning after that date. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers, Principal versus Agent Considerations (Reporting Revenue versus Net) , in April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customer s , identifying Performance Obligations and Licensing , and in May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customer s, Nar row-Scope Improvements and Practical Expedients , which provide additional clarification on certain topics addressed in ASU 2014-09. ASU 2016-08, ASU 2016-10, and ASU 2016-12 follow the same implementation guidelines as ASU 2014-09 and ASU 2015-14. All of these aforementioned ASUs have been codified under ASC 606, Revenue from Contracts with Customers. We adopted this standard on January 1, 2018 utilizing the modified retrospective approach applied to open contracts at the date of initial application. As the cumulative effect of applying the modified retrospective approach was immaterial, no adjustment was recorded to the opening balance of retained earnings. The timing of revenue recognition for our various revenue streams was not materially impacted by the adoption of this standard. The Company believes its business processes, systems, and controls are appropriate to support recognition and disclosure under ASC 606. In addition, the adoption has led to increased footnote disclosures. The overall financial impact of adopting this standard did not have a material impact on our consolidated financial statements, financial condition, changes in financial condition or results of operations. The Company adopted ASU 2016-18, Statement of Cash Flows, Restricted Cash (Topic 230) , during the first quarter of 2018. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows, Restricted Cash (Topic 230), which addresses the diversity in the classification and presentation of changes in restricted cash on the statement of cash flows. The amendment requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and restricted cash. Restricted cash amounts are to be included with cash and cash equivalents when reconciling the beginning and ending amounts of cash on the statement of cash flows. The guidance is effective for annual periods beginning after December 15, 2017. Early adoption is permitted. The adoption of this ASU did not have a material impact on our financial statements, financial condition, changes in financial condition or results of operations. The Company adopted ASU 2017-09, Compensation, Stock Compensation (Topic 718), during the first quarter of 2018. In May 2017, the FASB issued ASU 2017-09, Compensation, Stock Compensation (Topic 718), to clarify which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The new standard is required to be applied prospectively. The guidance was effective January 1, 2018, and the adoption of this ASU did not have a material impact on our financial statements, financial condition, changes in financial condition or results of operations. Accounting Pronouncements Issued But Not Yet Effective In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) . Under ASU 2016-02, an entity will be required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. ASU 2016-02 offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. For public companies, ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, and requires a modified retrospective adoption, with early adoption permitted. Management is currently in the initial stages of evaluating the future impact of ASU 2016-02 on its consolidated financial position, results of operations and cash flows. The overall financial impact of adopting this standard is unknown at this time. In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (Topic 220), which amended its standard on comprehensive income to provide an option for an entity to reclassify the stranded tax effects of the Tax Cuts and Jobs Act that was passed in December of 2017 (the "TCJA") from accumulated other comprehensive income (AOCI) directly to retained earnings. The stranded tax effects result from the remeasurement of deferred tax assets and liabilities which were originally recorded in comprehensive income but whose remeasurement is reflected in the income statement. This is a one-time amendment applicable only to the changes resulting from the TCJA. The standard will be effective for us on January 1, 2019, and may be reflected retroactively to any period in which the impacts of the TCJA are recognized. The standard permits early adoption for any financial statements that have not been released as of the date of the revised standard. The overall financial impact of adopting this standard is unknown at this time. Other recently issued accounting pronouncements did not or are not believed by management to have a material impact on the Company’s present or future financial statements. |
Fair Value Measurement, Policy | The Company utilizes fair value measurements to record fair value adjustments to certain financial assets and to determine fair value disclosures. Fair Value Measurements and Disclosure (Topic 820) of the FASB establishes a fair value hierarchy that requires the use of observable market data, when available, and prioritizes the inputs to valuation techniques used to measure fair value in the following categories: • Level 1 – Quoted unadjusted prices for identical instruments in active markets. • Level 2 – Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations in which all observable inputs and significant value drivers are observable in active markets. • Level 3 – Model-derived valuations in which one or more significant inputs or significant value drivers are unobservable, including assumptions developed by the Company. The primary objective of the Company’s investment activities is to preserve principal while maximizing yields without significantly increasing risk. The investment instruments held by the Company are money market funds and interest bearing deposits for which quoted market prices are readily available. The Company considers these highly liquid investments to be cash equivalents. These investments are classified within Level 1 of the fair value hierarchy because they are valued based on quoted market prices in active markets. |
ORGANIZATION AND SUMMARY OF S18
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Summary of Cash, Cash Equivalents, and Restricted Cash | The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Company's consolidated balance sheets to the total amount presented in the consolidated statement of cash flows (in thousands) : March 31, 2018 December 31, 2017 Cash and cash equivalents at beginning of period $ 37,682 $ 28,687 Current restricted cash at beginning of period 1,514 1,510 Long-term restricted cash at beginning of period 7,565 6,429 Cash, cash equivalents, and restricted cash at beginning of period $ 46,761 $ 36,626 Cash and cash equivalents at end of period $ 37,936 $ 37,682 Current restricted cash at end of period 1,515 1,514 Long-term restricted cash at end of period 7,598 7,565 Cash, cash equivalents, and restricted cash at end of period $ 47,049 $ 46,761 |
Loyalty deferred revenue | The deferred revenue associated with the loyalty program at March 31, 2018 and December 31, 2017 was $6.1 million and $6.4 million , respectively. Loyalty program (in thousands) Loyalty deferred revenue as of January 1, 2017 $ 7,033 Loyalty points forfeited (5,895 ) Loyalty points used (14,316 ) Loyalty points vested 17,836 Loyalty points unvested 1,748 Loyalty deferred revenue as of December 31, 2017 $ 6,406 Loyalty deferred revenue as of January 1, 2018 $ 6,406 Loyalty points forfeited (1,235 ) Loyalty points used (3,565 ) Loyalty points vested 2,808 Loyalty points unvested 1,725 Loyalty deferred revenue as of March 31, 2018 $ 6,139 |
Sales return reserve | For the three months ended March 31, 2018 our sales return reserve consisted of the following (in thousands): Sales reserve as of January 1, 2018 $ 117 Provision related to sales made in current period 340 Adjustment related to sales made in prior periods (24 ) Actual returns or credits related to current period (220 ) Actual returns or credits related to prior periods (93 ) Sales reserve as of March 31, 2018 $ 120 |
INVENTORIES (Tables)
INVENTORIES (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Inventory Disclosure [Abstract] | |
Schedule of inventory | Inventories at March 31, 2018 and December 31, 2017 , consisted of the following (in thousands) : March 31, 2018 December 31, 2017 Raw materials $ 869 $ 879 Finished goods 8,745 9,072 Inventory reserves for obsolescence (566 ) (566 ) Total $ 9,048 $ 9,385 |
STOCK-BASED COMPENSATION (Table
STOCK-BASED COMPENSATION (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Schedule of compensation cost | A summary of changes in stock options outstanding during the three months ended March 31, 2018 and 2017 are as follows: Three months ended March 31, 2018 2017 Total gross compensation expense $ 36 $ 77 Total tax benefit associated with compensation expense 7 13 Total net compensation expense $ 29 $ 64 |
Schedule of unrecognized compensation expense | As of March 31, 2018 , the Company expects to record compensation expense in the future as follows (in thousands) : Nine months ending December 31, 2018 Year ending December 31, 2019 2020 2021 Total gross unrecognized compensation expense $ 85 $ 38 $ — $ — Tax benefit associated with unrecognized compensation expense 12 3 — — Total net unrecognized compensation expense $ 73 $ 35 $ — $ — |
SHAREHOLDERS' EQUITY (Tables)
SHAREHOLDERS' EQUITY (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Equity [Abstract] | |
Components of accumulated other comprehensive income | The after-tax components of accumulated other comprehensive income, are as follows (in thousands) : Foreign Currency Translation Pension Postretirement Benefit Obligation Accumulated Other Comprehensive Income, Net Balance as of December 31, 2017 $ 5,703 $ 281 $ 5,984 Current-period change (1) 334 — 334 Balance as of March 31, 2018 $ 6,037 $ 281 $ 6,318 (1) No amounts reclassified from accumulated other comprehensive income. |
FAIR VALUE (Tables)
FAIR VALUE (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Fair Value Disclosures [Abstract] | |
Fair value, assets measured on recurring basis | The table below presents the recorded amount of financial assets measured at fair value (in thousands) on a recurring basis as of March 31, 2018 and December 31, 2017 . March 31, 2018 Level 1 Level 2 Level 3 Total Assets Money Market Funds – Fidelity, US $ — $ — $ — $ — Interest bearing deposits – various banks 25,246 — — 25,246 Total assets $ 25,246 $ — $ — $ 25,246 Amounts included in: Cash and cash equivalents $ 18,173 $ — $ — $ 18,173 Restricted cash 742 — — 742 Long-term restricted cash 6,331 — — 6,331 Total $ 25,246 $ — $ — $ 25,246 December 31, 2017 Level 1 Level 2 Level 3 Total Assets Money Market Funds – Fidelity, US $ — $ — $ — $ — Interest bearing deposits – various banks 23,695 — — 23,695 Total assets $ 23,695 $ — $ — $ 23,695 Amounts included in: Cash and cash equivalents $ 16,651 $ — $ — $ 16,651 Restricted cash 741 — — 741 Long-term restricted cash 6,303 — — 6,303 Total $ 23,695 $ — $ — $ 23,695 |
SEGMENT INFORMATION (Tables)
SEGMENT INFORMATION (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Segment Reporting [Abstract] | |
Net sales shipped to customers by geographic region | Consolidated net sales shipped to customers in these regions, along with pack and product information for the three months ended March 31, were as follows (in millions, except percentages) : Three months Region 2018 2017 Americas $ 13.7 33.1 % $ 15.5 38.2 % Asia/Pacific 24.2 58.4 % 21.9 53.9 % EMEA 3.5 8.5 % 3.2 7.9 % Totals $ 41.4 100.0 % $ 40.6 100.0 % |
Product and pack information | Three months 2018 2017 Consolidated product sales $ 41.0 $ 35.0 Consolidated pack sales and associate fees (a) 0.5 5.7 Consolidated other (0.1 ) (0.1 ) Consolidated total net sales $ 41.4 $ 40.6 |
Long-lived assets, by geographic region | Long-lived assets, which include property and equipment and construction in process for the Company and its subsidiaries, as of March 31, 2018 and December 31, 2017 , reside in the following regions, as follows (in millions) : Region March 31, 2018 December 31, 2017 Americas $ 4.1 $ 2.9 Asia/Pacific 1.3 1.3 EMEA 0.1 0.1 Total $ 5.5 $ 4.3 |
Inventory balances, by region | Inventory balances, which consist of raw materials, work in process, finished goods, and promotional materials, as offset by the allowance for slow moving or obsolete inventories, reside in the following regions (in millions) : Region March 31, 2018 December 31, 2017 Americas $ 3.7 $ 3.5 Asia/Pacific 4.0 4.5 EMEA 1.3 1.4 Total $ 9.0 $ 9.4 |
ORGANIZATION AND SUMMARY OF S24
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) $ in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 31, 2018USD ($)region | Dec. 31, 2017USD ($) | |
Cash and Cash Equivalents [Abstract] | ||
Number of regions in which company sells products | region | 3 | |
Credit card receivables | $ 2,700 | $ 2,000 |
Cash and cash equivalents held in foreign bank accounts | 33,800 | 30,600 |
Restricted Cash [Abstract] | ||
Restricted cash | 9,100 | 9,100 |
Accounts Receivable [Abstract] | ||
Accounts receivable, net of allowance | 400 | 273 |
Allowance for doubtful accounts | 600 | 600 |
Other Assets [Abstract] | ||
Other assets | 3,944 | 3,876 |
Deposits for building leases | 2,000 | 1,900 |
Fair trade commission deposits | 1,800 | 1,700 |
Indefinite lived intangible assets | 200 | 200 |
Notes Payable [Abstract] | ||
Notes payable | 900 | 800 |
Notes payable, current portion | 916 | 815 |
Other Long-Term Liabilities [Abstract] | ||
Other long-term liabilities | 2,850 | 1,265 |
Uncertain income tax position | 200 | 200 |
Accrued lease restoration costs | 400 | 400 |
Defined benefit plan obligation | 395 | 400 |
Lease incentive payable, noncurrent | $ 1,400 | |
Revenue, remaining performance obligation, expected timing of satisfaction, period | 12 months | |
Valuation and Qualifying Accounts Disclosure [Line Items] | ||
Deferred commissions | $ 3,912 | 3,880 |
Amortization of deferred commissions | 2,700 | |
Deferred revenue | 8,605 | 8,561 |
Deferred revenue, revenue recognized during the period | 6,800 | |
Loyalty Program [Roll Forward] | ||
Loyalty deferred revenue, beginning balance | 6,406 | 7,033 |
Loyalty points forfeited or expired | (1,235) | (5,895) |
Loyalty points used | (3,565) | (14,316) |
Loyalty points vested | 2,808 | 17,836 |
Loyalty points unvested | 1,725 | 1,748 |
Loyalty deferred revenue, ending balance | 6,139 | 6,406 |
Reserve for Sales Returns | ||
Movement in Valuation Allowances and Reserves [Roll Forward] | ||
Provision related to sales made in current period | 340 | |
Adjustment related to sales made in prior periods | (24) | |
Actual returns or credits related to current period | (220) | |
Actual returns or credits related to prior periods | (93) | |
Sales reserve, end of period | $ 120 | $ 117 |
ORGANIZATION AND SUMMARY OF S25
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Additional Information (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2018 | Dec. 31, 2017 | |
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Line Items] | ||
Percentage of sale returns | 1.50% | |
Revenue, number of performance obligations, product sales | 2 | |
Revenue, performance obligations, term of services, online business tools | 3 months | |
Revenue, number of performance obligations, online business tools | 3 | |
South Korea | ||
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Line Items] | ||
Net assets | $ 34.4 | $ 32.7 |
ORGANIZATION AND SUMMARY OF S26
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Schedule of Cash and Cash Equivalents (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 | Mar. 31, 2017 | Dec. 31, 2016 |
Cash And Cash Equivalents, Resticted Cash And Restricted Cash Equivalents [Roll Forward] | ||||
Cash and cash equivalents, at carrying value | $ 37,936 | $ 37,682 | $ 28,687 | |
Restricted cash, current | 1,515 | 1,514 | 1,510 | |
Restricted cash, noncurrent | 7,598 | 7,565 | 6,429 | |
Cash, cash equivalents, restricted cash and restricted cash equivalents | $ 47,049 | $ 46,761 | $ 37,894 | $ 36,626 |
INVENTORIES (Details)
INVENTORIES (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Inventory Disclosure [Abstract] | ||
Raw materials | $ 869 | $ 879 |
Finished goods | 8,745 | 9,072 |
Inventory reserves for obsolescence | (566) | (566) |
Total | $ 9,048 | $ 9,385 |
INCOME TAXES (Details)
INCOME TAXES (Details) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Income Tax Disclosure [Abstract] | ||
Effective tax rate | 53.70% | 36.50% |
EARNINGS PER SHARE (Details)
EARNINGS PER SHARE (Details) - $ / shares | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Earnings Per Share [Abstract] | ||
Average common stock closing price (in dollars per share) | $ 14.68 | $ 18.42 |
STOCK-BASED COMPENSATION (Detai
STOCK-BASED COMPENSATION (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Apr. 17, 2017 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Number of shares authorized (in shares) | 250,000 | ||
Number of shares available for grant (in shares) | 224,154 | ||
Minimum | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Percentages of stock option ownership considered for higher exercise price of option | 10.00% | ||
Vesting period of stock options | 2 years | ||
Maximum | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Option exercise price as percentages of closing exercise price of stock for specific shareholders | 110.00% | ||
Vesting period of stock options | 3 years | ||
Stock Options | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Expiration period of stock option plan | 10 years | ||
Incentive Stock Options | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Expiration period of stock option plan | 5 years | ||
2017 Plan | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Number of shares authorized (in shares) | 181,674 | ||
2008 Plan | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Number of shares authorized (in shares) | 68,326 | ||
2008 Plan | Stock Options | |||
Share-based compensation expense [Abstract] | |||
Total gross compensation expense | $ 36 | $ 77 | |
Total tax benefit associated with compensation expense | 7 | 13 | |
Total net compensation expense | 29 | $ 64 | |
Unrecognized compensation expense [Abstract] | |||
Total gross unrecognized compensation expense to be recognized over remainder of current fiscal year | 85 | ||
Total gross unrecognized compensation expense in 2019 | 38 | ||
Total gross unrecognized compensation expense in 2020 | 0 | ||
Total gross unrecognized compensation expense in 2021 | 0 | ||
Tax benefit associated with unrecognized compensation expense remainder of current fiscal year | 12 | ||
Tax benefit associated with unrecognized compensation expense in 2019 | 3 | ||
Tax benefit associated with unrecognized compensation expense in 2020 | 0 | ||
Tax benefit associated with unrecognized compensation expense in 2021 | 0 | ||
Total net unrecognized compensation expense | 73 | ||
Total net unrecognized compensation expense in 2019 | 35 | ||
Total net unrecognized compensation expense in 2020 | 0 | ||
Total net unrecognized compensation expense in 2021 | $ 0 |
SHAREHOLDERS' EQUITY (Details)
SHAREHOLDERS' EQUITY (Details) - USD ($) $ / shares in Units, $ in Thousands | Mar. 28, 2018 | Mar. 12, 2018 | Mar. 31, 2018 |
AOCI Attributable to Parent, Net of Tax [Roll Forward] | |||
December 31, 2017 | $ 40,241 | ||
Current-period change | 334 | ||
March 31, 2018 | 40,252 | ||
Dividends [Abstract] | |||
Dividend payable per share (in dollars per share) | $ 0.125 | ||
Dividend paid per share (in dollars per share) | $ 0.125 | ||
Accumulated Other Comprehensive Income, Net | |||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | |||
December 31, 2017 | 5,984 | ||
March 31, 2018 | 6,318 | ||
Foreign Currency Translation | |||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | |||
December 31, 2017 | 5,703 | ||
Current-period change | 334 | ||
March 31, 2018 | 6,037 | ||
Pension Postretirement Benefit Obligation | |||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | |||
December 31, 2017 | 281 | ||
Current-period change | 0 | ||
March 31, 2018 | $ 281 |
LITIGATION (Details)
LITIGATION (Details) - USD ($) | Apr. 24, 2018 | Oct. 13, 2017 | Jun. 22, 2017 | Jan. 31, 2014 |
Ralph Pinkston | Pending Litigation | ||||
Loss Contingencies [Line Items] | ||||
Damages sought | $ 200,000 | |||
Busan Custom Office | Pending Litigation | ||||
Loss Contingencies [Line Items] | ||||
Damages paid | $ 1,000,000 | |||
Dr. H. Reginald McDaniel | ||||
Loss Contingencies [Line Items] | ||||
Bankruptcy claims, amount of claims filed | $ 700,000 | |||
Dr. H. Reginald McDaniel | Settled Litigation | Subsequent Event | ||||
Loss Contingencies [Line Items] | ||||
Litigation settlement, amount awarded from other party | $ 62,976.69 | |||
Litigation, Maximum Period Allowed For Objection To Final Report | 30 days |
FAIR VALUE (Details)
FAIR VALUE (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Amounts included in [Abstract] | ||
Restricted cash | $ 9,100 | $ 9,100 |
Recurring Basis | ||
Assets [Abstract] | ||
Money Market Funds - Fidelity, US | 0 | 0 |
Interest bearing deposits - various banks | 25,246 | 23,695 |
Amounts included in [Abstract] | ||
Cash and cash equivalents | 18,173 | 16,651 |
Restricted cash | 742 | 741 |
Long-term restricted cash | 6,331 | 6,303 |
Total | 25,246 | 23,695 |
Recurring Basis | Level 1 | ||
Assets [Abstract] | ||
Money Market Funds - Fidelity, US | 0 | 0 |
Interest bearing deposits - various banks | 25,246 | 23,695 |
Amounts included in [Abstract] | ||
Cash and cash equivalents | 18,173 | 16,651 |
Restricted cash | 742 | 741 |
Long-term restricted cash | 6,331 | 6,303 |
Total | 25,246 | 23,695 |
Recurring Basis | Level 2 | ||
Assets [Abstract] | ||
Money Market Funds - Fidelity, US | 0 | 0 |
Interest bearing deposits - various banks | 0 | 0 |
Amounts included in [Abstract] | ||
Cash and cash equivalents | 0 | 0 |
Restricted cash | 0 | 0 |
Long-term restricted cash | 0 | 0 |
Total | 0 | 0 |
Recurring Basis | Level 3 | ||
Assets [Abstract] | ||
Money Market Funds - Fidelity, US | 0 | 0 |
Interest bearing deposits - various banks | 0 | 0 |
Amounts included in [Abstract] | ||
Cash and cash equivalents | 0 | 0 |
Restricted cash | 0 | 0 |
Long-term restricted cash | 0 | 0 |
Total | $ 0 | $ 0 |
SEGMENT INFORMATION (Details)
SEGMENT INFORMATION (Details) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2018USD ($)countryregion | Mar. 31, 2017USD ($) | Dec. 31, 2017USD ($) | |
Segment Reporting [Abstract] | |||
Number of countries in which entity network marketing and distribution channels operates | country | 25 | ||
Number of countries in which company operates facilities | country | 14 | ||
Number of countries in which company sells products | country | 26 | ||
Number of regions in which company sells products | region | 3 | ||
Revenue from External Customer [Line Items] | |||
Consolidated total net sales | $ 41,383 | $ 40,641 | |
Percent of total revenue | 100.00% | 100.00% | |
Long-lived assets by regions [Abstract] | |||
Long-lived assets | $ 5,500 | $ 4,300 | |
Inventory, by country [Abstract] | |||
Inventories, net | 9,048 | 9,385 | |
Consolidated product sales | |||
Revenue from External Customer [Line Items] | |||
Consolidated total net sales | 41,000 | $ 35,000 | |
Consolidated Pack Sales | |||
Revenue from External Customer [Line Items] | |||
Consolidated total net sales | 500 | 5,700 | |
Consolidated Other, Including Freight | |||
Revenue from External Customer [Line Items] | |||
Consolidated total net sales | (100) | (100) | |
Reportable Geographical Components | Americas | |||
Revenue from External Customer [Line Items] | |||
Consolidated total net sales | $ 13,700 | $ 15,500 | |
Percent of total revenue | 33.10% | 38.20% | |
Long-lived assets by regions [Abstract] | |||
Long-lived assets | $ 4,100 | 2,900 | |
Inventory, by country [Abstract] | |||
Inventories, net | 3,700 | 3,500 | |
Reportable Geographical Components | Asia/Pacific | |||
Revenue from External Customer [Line Items] | |||
Consolidated total net sales | $ 24,200 | $ 21,900 | |
Percent of total revenue | 58.40% | 53.90% | |
Long-lived assets by regions [Abstract] | |||
Long-lived assets | $ 1,300 | 1,300 | |
Inventory, by country [Abstract] | |||
Inventories, net | 4,000 | 4,500 | |
Reportable Geographical Components | EMEA | |||
Revenue from External Customer [Line Items] | |||
Consolidated total net sales | $ 3,500 | $ 3,200 | |
Percent of total revenue | 8.50% | 7.90% | |
Long-lived assets by regions [Abstract] | |||
Long-lived assets | $ 100 | 100 | |
Inventory, by country [Abstract] | |||
Inventories, net | $ 1,300 | $ 1,400 |