Natural Health Trends Corp. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

SEGMENT INFORMATION

SEGMENT INFORMATION

12 Months Ended

Dec. 31, 2019

The Company sells products to a member network that operates in a seamless manner from market to market, except for the China market where it sells to some consumers through an e-commerce platform, and the Russia and Kazakhstan market where the Company’s engagement of a third-party service provider results in a different economic structure than its other markets. Otherwise, the Company believes that all of its other operating segments have similar economic characteristics and are similar in the nature of the products sold, the product acquisition process, the types of customers products are sold to, the methods used to distribute the products, and the nature of the regulatory environment. Therefore, the Company aggregates its other operating segments into a single reporting segment (the “Primary Reporting Segment”).

The Company reviews its net sales and operating income (loss) by operating segment, and reviews its assets and capital expenditures on a consolidated basis and not by operating segment. As such, net sales and operating income (loss) are presented by reportable segment and assets and capital expenditures by operating segment are not presented. Segment operating income (loss) is adjusted for certain direct costs and commission allocation.

The Company’s operating information by geographic area are as follows (in thousands):



	Year Ended December 31,
	2019		2018
Net sales:
Primary Reporting Segment	$	73,693	$	183,298
China	2,941		7,744
Russia and Kazakhstan	980		868
Total net sales	$	77,614	$	191,910



Income (loss) from operations:
Primary Reporting Segment	$	9,339		$	45,851
China	(1,719		)	2,579
Russia and Kazakhstan	(115		)	(154		)
Total income (loss) from operations for reportable segments	7,505			48,276
Unallocated corporate expenses	(14,528		)	(14,544		)
Other income, net	1,426			789
Income (loss) before income taxes	$	(5,597	)	$	34,521

The Company’s net sales by geographic area are as follows (in thousands):



	Year Ended December 31,
	2019		2018
Net sales from external customers:
United States	$	2,003	$	3,637
Canada	1,048		1,710
Peru	2,380		1,635
Hong Kong¹	62,724		169,452
China	2,941		7,744
Taiwan	3,126		3,964
South Korea	368		493
Russia and Kazakhstan	980		868
Europe	1,370		1,644
Other foreign countries	674		763
Total net sales	$	77,614	$	191,910

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¹ Substantially all of our Hong Kong revenues are derived from the sale of products that are delivered to members in China. See “Item 1A. Risk Factors”.

The Company’s net sales by product and service are as follows (in thousands):



	Year Ended December 31,
	2019			2018
Net sales by product and service:
Product sales	$	73,048		$	181,865
Freight and other	6,106			13,329
Less: sales returns	(1,540		)	(3,284		)
Total net sales	$	77,614		$	191,910

Due to system constraints, it is impracticable for the Company to separately disclose sales by product category for the years presented.

The Company’s long-lived assets by geographic area are as follows (in thousands):



	December 31,
	2019		2018
Long-lived assets:
United States	$	379	$	521
Hong Kong	135		145
China	57		61
Other foreign countries	164		207
Total long-lived assets	$	735	$	934