MANNATECH, INCORPORATED The following discussion is intended to assist in the understanding of our consolidated financial position and our results of operations for each of the two years endedDecember 31, 2019 and 2018. This discussion should be read in conjunction with "Item 15. - Consolidated Financial Statements beginning on page F-1 of this report and with other financial information included elsewhere in this report. Unless stated otherwise, all financial information presented below, throughout this report, and in the consolidated financial statements and related notes includesMannatech and all of our subsidiaries on a consolidated basis. Refer to the Non-GAAP Financial Measure section herein for a description of how Constant dollar ("Constant dollar") growth rate (a Non-GAAP financial metric) is determined. COMPANY OVERVIEWMannatech is a global wellness solution provider, which was incorporated and began operations inNovember 1993 . We develop and sell innovative, high quality, proprietary nutritional supplements, topical and skin care and anti-aging products, and weight-management products that target optimal health and wellness. We currently sell our products in three regions: (i) theAmericas (the United States ,Canada ,Colombia andMexico ); (ii)Europe /theMiddle East /Africa ("EMEA") (Austria , theCzech Republic ,Denmark ,Estonia ,Finland ,Germany , theRepublic of Ireland ,Namibia ,the Netherlands ,Norway ,South Africa ,Spain ,Sweden and theUnited Kingdom ); and (iii)Asia/Pacific (Australia ,Japan ,New Zealand , theRepublic of Korea ,Singapore ,Taiwan ,Hong Kong , andChina ). We conduct our business as a single reporting segment and primarily sell our products through a network of approximately 169,000 active associates and preferred customer positions held by individuals that had purchased our products and/or packs or paid associate fees during the last 12 months, who we refer to as current associates and preferred customers. New pack sales and the receipt of new associate fees in connection with new positions in our network are leading indicators for the long-term success of our business. New associate or preferred customer positions are created in our network when associate fees are paid or packs and products are purchased for the first time under a new account. We operate as a seller of nutritional supplements, topical and skin care and anti-aging products, and weight-management products through our network marketing distribution channels operating in 25 countries and cross-border e-commerce retail inChina . We review and analyze net sales by geographical location and by packs and products on a consolidated basis. Each of our subsidiaries sells similar products and exhibits similar economic characteristics, such as selling prices and gross margins. Because we sell our products through network marketing distribution channels, the opportunities and challenges that affect us most are: recruitment of new and retention of current associates and preferred customers that occupy sales or purchasing positions in our network; entry into new markets and growth of existing markets; niche market development; new product introduction; and investment in our infrastructure. Our subsidiary inChina , Meitai, is currently operating under a cross-border e-commerce model. Meitai cannot legally conduct a direct selling business inChina unless it acquires a direct selling license inChina . 41
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Current Economic Conditions and Recent Developments
Overall net sales decreased$15.8 million , or 9.1%, for 2019, as compared to 2018. Our 2019 net sales declined$10.6 million , or 6.1%, on a Constant dollar basis (see Non-GAAP Financial Measures, below), and unfavorable foreign exchange caused a$5.3 million decrease in GAAP net sales as compared to 2018. InDecember 2019 , a novel virus began inChina with no material impact to our 2019 sales. Please see Note 16 Subsequent Events for additional information regarding recent developments of this virus.
Our operations outside of the
The net sales comparisons for the year ended
Associate fees are collected in all markets exceptKorea andMexico , where packs are still sold. Associate fees are paid annually in order for the associate to be entitled to earn commissions, benefits and incentives. The number of packs sold to, and associate fees paid by, new and continuing independent associates and preferred customers decreased 0.7% during 2019 to approximately 96,000 as compared to 96,700 during 2018. In addition, average pack value decreased by$2 , to$24 for the year endedDecember 31, 2019 , as compared to$26 for the same period in 2018. The number of product orders decreased 5.8% during the year endedDecember 31, 2019 to approximately 841,700 as compared to 893,500 during the same period in 2018. The average product order value decreased 3.6% during the year endedDecember 31, 2019 to$190 , as compared to$197 for the same period in 2018. Revenue deferred through the loyalty program decreased 15.1% during the year endedDecember 31, 2019 as compared to the same period in 2018. Excluding the effects due to the translation of foreign currencies intoU.S. dollars, net sales would have decreased$10.6 million for 2019. These adjusted net sales expressed in Constant dollars are a non-GAAP financial measure discussed in further detail below. 42
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RESULTS OF OPERATIONS
Year Ended
The tables below summarize our consolidated operating results in dollars and as a percentage of net sales for the years endedDecember 31, 2019 and 2018 (in thousands, except percentages). 2019 2018 Change Total % of Total % of Dollars net sales dollars net sales Dollar Percentage Net sales$ 157,728 100.0 %$ 173,558 100.0 %$ (15,830 ) (9.1 )% Cost of sales 31,550 20.0 % 34,476 19.9 % (2,926 ) (8.5 )% Gross profit 126,178 80.0 % 139,082 80.1 % (12,904 ) (9.3 )% Operating expenses: Commissions and incentives 64,254 40.7 % 73,514 42.4 % (9,260 ) (12.6 )% Selling and administrative expenses 30,824 19.5 % 34,156 19.7 % (3,332 ) (9.8 )% Depreciation and amortization 2,088 1.3 % 2,064 1.0 % 24 1.2 % Other operating costs 22,579 14.3 % 29,438 17.0 % (6,859 ) (23.3 )% Total operating expenses 119,745 75.9 % 139,172 80.2 % (19,427 ) (14.0 )% Income (loss) from operations 6,433 4.1 % (90 ) (0.1 )% 6,523 (7,247.8 )% Interest income (expense) (16 ) - % 288 0.2 % (304 ) (105.6 )% Other income (expense), net (681 ) (0.4 )% 291 0.2 % (972 ) 334.0 % Income (loss) before income taxes 5,736 3.6 % 489 0.3 % 5,247 1,073.0 % Income tax provision (2,447 ) (1.6 )% (4,375 ) (2.5 )% 1,928 (44.1 )% Net income (loss)$ 3,289 2.1 %$ (3,886 ) (2.2 )%$ 7,175 184.6 % 43
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Non-GAAP Financial Measures
To supplement our financial results presented in accordance with generally accepted accounting principles inthe United States ("GAAP"), we disclose operating results that have been adjusted to exclude the impact of changes due to the translation of foreign currencies intoU.S. dollars, including changes in:Net Sales , Gross Profit, and Income from Operations. We refer to these adjusted financial measures as Constant dollar items, which are Non-GAAP financial measures. We believe these measures provide investors an additional perspective on trends. To exclude the impact of changes due to the translation of foreign currencies intoU.S. dollars, we calculate current year results and prior year results at a constant exchange rate, which is the prior year's rate. Currency impact is determined as the difference between actual growth rates and constant currency growth rates. 2019 2018 Constant $ Change GAAP Non-GAAP GAAP Measure: Measure: Measure: Total $ Constant $ Total $ Dollar Percent Net sales$ 157.7 $ 163.0 $ 173.6 $ (10.6 ) (6.1 )% Product$ 154.6 $ 159.7 $ 170.2 $ (10.5 ) (6.2 )% Pack and associate fees$ 2.3 $ 2.4 $ 2.5 $ (0.1 ) (4.0 )% Other$ 0.8 $ 0.9 $ 0.9 $ - - % Gross profit$ 126.2 $ 130.5 $ 139.1
Consolidated net sales by region for the years ended
2019 2018
Americas $ 48.0 30.4 % $ 58.7 33.8 %
Asia/Pacific 96.0 60.9 % 101.7 58.6 %
EMEA 13.7 8.7 % 13.2 7.6 %
Total $ 157.7 100.0 % $ 173.6 100.0 %
Net Sales
Overall net sales decreased by
Sales for theAmericas decreased by$10.7 million , or 18.2%, to$48.0 million for 2019 as compared to$58.7 million for the same period in 2018. This decrease was primarily due to an 18.4% decline in the number of active independent associates and preferred customers partially offset by a 16.5% increase in revenue per active independent associate and preferred customer. During 2019,Asia/Pacific sales decreased by$5.7 million , or 5.6%, to$96.0 million as compared to$101.7 million for 2018. This decrease was primarily due to a 9.7% decrease in the number of active independent associates and preferred customers partially offset by a 2.4% increase in revenue per active independent associate and preferred customer. During the year endedDecember 31, 2019 , the loyalty program inAsia/Pacific decreased sales by$1.2 million , as compared to the same period in 2018. Foreign currency exchange had the effect of decreasing revenue by$4.1 million for the year endedDecember 31, 2019 , as compared to the same period in 2018. The currency impact is primarily due to the weakening of the Korean Won, Australian Dollar, Chinese Yuan, New Zealand Dollar, Taiwanese Dollar and Singapore Dollar, which was partially offset by the strengthening of the Japanese Yen and Hong Kong Dollar. 44
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During 2019, EMEA sales increased by$0.5 million , or 3.8%, to$13.7 million as compared to$13.2 million for 2018. This increase was primarily due to a 11.5% increase in revenue per active independent associate and preferred customer, which was partially offset by a 2.9% decrease in the number of active independent associates and preferred customers. Foreign currency exchange had the effect of decreasing revenue by$1.2 million when the year endedDecember 31, 2019 is compared to the same period in 2018. The currency impact is primarily due to the weakening of the South African Rand, British Pound, Euro, Norwegian Krone, Swedish Krona andDanish Krone .
Our total sales and sales mix could be influenced by any of the following:
• changes in our sales prices;
• changes in consumer demand;
• changes in the number of independent associates and preferred customers;
• changes in competitors' products;
• changes in economic conditions, including as a result of COVID-19;
• changes in regulations;
• announcements of new scientific studies and breakthroughs;
• introduction of new products;
• discontinuation of existing products;
• adverse publicity;
• changes in our commissions and incentives programs;
• direct competition; and
• fluctuations in foreign currency exchange rates.
Our sales mix for the years endedDecember 31 , was as follows (in millions, except percentages): Change 2019 2018 Dollar Percentage Consolidated product sales$ 154.6 $ 170.2 $ (15.6 ) (9.2 )% Consolidated pack sales and associate fees 2.3 2.5 (0.2 ) (8.0 )% Consolidated other 0.8 0.9 (0.1 ) (11.1 )% Total consolidated net sales$ 157.7 $ 173.6 $ (15.9 ) (9.2 )% Product Sales Our product sales are made to independent associates and preferred customers at published wholesale prices. Product sales for the year endedDecember 31, 2019 decreased by$15.6 million , or 9.2%, to$154.6 million , as compared to$170.2 million for the same period in 2018. The decrease in product sales was primarily due to a decrease in the number of orders processed. The average order value in 2019 was$190 , as compared to$197 for the same period in 2018. The number of orders processed during the year endedDecember 31, 2019 decreased by 5.8% as compared to the same period in 2018.
Pack Sales and Associate Fees
The Company collects associate fees in all markets except
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In theKorea andMexico markets, packs may still be purchased by our associates who wish to build aMannatech business. We do not collect associate fees or sell packs in our non-direct selling business in mainlandChina . Packs contain products that are discounted from both the published retail and associate prices. There are several pack options available to our associates. In certain of these markets, pack sales are completed during the final stages of the registration process and can provide new associates with valuable training and promotional materials, as well as products for resale to retail customers, demonstration purposes, and personal consumption. Business-building associates in these markets can also purchase an upgrade pack, which provides the associate with additional promotional materials, additional products, and eligibility for additional commissions and incentives. The dollar amount of pack sales and associate fees associated with new and continuing independent associate positions held by individuals in our network was as follows, for the years endedDecember 31 (in millions, except percentages): Change 2019 2018 Dollar Percentage New$ 0.6 $ 0.7 $ (0.1 ) (14.3 )% Continuing 1.7 1.8 (0.1 ) (5.6 )% Total$ 2.3 $ 2.5 $ (0.2 ) (8.0 )% Total pack sales and associate fees for the year endedDecember 31, 2019 decreased by$0.2 million , or 8.0%, to$2.3 million , as compared to$2.5 million for the same period in 2018 as the number of packs sold and associate fees collected decreased by 0.7%. Also, the average pack value for the year endedDecember 31, 2019 was$24 , as compared to$26 for the same period in 2018.
During 2019 and 2018, we took the following actions in an effort to increase the number of independent associates and preferred customers:
• registered our most popular products with the appropriate regulatory
agencies in all countries of operations;
• rolled out new products;
• launched an aggressive marketing and educational campaign;
• continued to strengthen compliance initiatives;
• concentrated on publishing results of research studies and clinical
trials related to our products;
• initiated additional incentives;
• explored new advertising and educational tools to broaden name
recognition; and
• implemented changes to our global associate career and compensation plan.
The approximate number of active new and continuing active associates and
preferred customers who purchased our packs or products or paid associate fees
during the twelve months ended
2019 2018
New 81,000 47.9 % 86,000 43.0 %
Continuing 88,000 52.1 % 114,000 57.0 %
Total 169,000 100.0 % 200,000 100.0 %
Other Sales
Other sales consisted of: (i) sales of promotional materials; (ii) monthly fees
collected for the Success Tracker™ and Mannatech+ customized electronic
business-building and educational materials, databases and applications; and
(iii) training and event registration fees. Promotional materials, training,
database applications and business management tools to support our independent
associates, which in turn helps stimulate product sales.
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For the year endedDecember 31, 2019 , other sales decreased by$0.1 million , or 11.1%, to$0.8 million , as compared to$0.9 million for the same period in 2018. The decrease was primarily due to the decrease in active new and continuing active associates and preferred customers.
Gross Profit
For the year endedDecember 31, 2019 , gross profit decreased by$12.9 million , or 9.3%, to$126.2 million , as compared to$139.1 million for the same period in 2018. Gross profit as a percentage of net sales decreased to 80.0% for 2019, as compared to 80.1% for 2018. The decrease in gross profit percentage was primarily due to increased inventory write-offs.
Commission and Incentives
Commission expenses decreased for the year endedDecember 31, 2019 , by 10.7%, or 7.4 million to$61.7 million , as compared to$69.1 million for the same period in 2018. Commissions as a percentage of net sales were 39.1% for the year endingDecember 31, 2019 and 39.8% for the same period in the prior year. This decrease was primarily due to the elimination of stale vouchers on terminated accounts. Incentive costs decreased for the year endedDecember 31, 2019 by 40.9%, or$1.8 million , to$2.6 million as compared to$4.4 million for the same period in 2018. The costs of incentives, as a percentage of net sales decreased to 1.6% for the year endedDecember 31, 2019 , as compared to 2.5% for the same period in 2018. This decrease was related to incentives in theAmericas andAsia/Pacific .
Selling and Administrative Expenses
Selling and administrative expenses include a combination of both fixed and variable expenses. These expenses consist of compensation and benefits for employees, temporary and contract labor and marketing-related expenses.
For the year endedDecember 31, 2019 , overall selling and administrative expenses decreased by$3.3 million , or 9.8%, to$30.8 million , as compared to$34.2 million for the same period in 2018. The decrease in selling and administrative expenses consisted of a$2.1 million decrease in marketing costs, of which$1.1 million was a VAT refund that was originally recorded in marketing costs, a$0.6 million decrease in distribution costs, a$0.4 million decrease in stock based compensation expense and a$0.2 million decrease in contract labor costs. Other Operating Costs
Other operating costs include accounting/legal/consulting fees, travel and entertainment expenses associated with corporate sponsored events, credit card processing fees, off-site storage fees, utilities, bad debt, and other miscellaneous operating expenses.
For the year endedDecember 31, 2019 , other operating costs decreased by$6.9 million , or 23.3%, to$22.6 million , as compared to$29.4 million for the same period in 2018. For the year endedDecember 31, 2019 , other operating costs, as a percentage of net sales, were 14.3%, as compared to 17.0% for the same period in 2018. The decrease was due to a$2.2 million decrease in travel and entertainment costs associated with management's decision to conduct Mannafest as a regional event instead of an international event, a$2.2 million decrease in office expenses due to the corporate office relocation during 2018, a$1.4 million decrease in legal and consulting fees, a$0.5 million decrease in bad debt expense, a$0.4 million decrease in credit card fees and a$0.1 million decrease in charitable contributions.
Depreciation and Amortization Expense
For both the years ended
Other Income (Expense), net
Primarily due to foreign exchange gains, other (expense) income was
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Provision for income taxes include current and deferred income taxes for both
our domestic and foreign operations. Our statutory income tax rates by
jurisdiction are as follows, for the years ended
Country 2019 2018 Australia 30.0 % 30.0 % Bermuda - % - % Canada 26.5 % 26.5 % China 25.0 % 25.0 % Colombia 33.0 % 33.0 % Cyprus 12.5 % 12.5 % Denmark 22.0 % 22.0 % Gibraltar 10.0 % 10.0 % Hong Kong 16.5 % 16.5 % Japan 34.6 % 30.2 % Mexico 30.0 % 30.0 % Norway 22.0 % 23.0 % Republic of Korea 22.0 % 22.0 % Russia(1) 20.0 % 20.0 % Singapore 17.0 % 17.0 % South Africa 28.0 % 28.0 % Sweden 21.4 % 22.0 % Switzerland(2) 9.2 % 9.2 % Taiwan 20.0 % 20.0 % Ukraine(3) 18.0 % 18.0 % United Kingdom 19.0 % 19.0 % United States 21.0 % 21.0 % (1)OnAugust 1, 2016 , the Company established a legal entity inRussia calledMannatech RUS Ltd. , but currently does not operate inRussia . (2)OnJuly 1, 2019 , the Company suspended operations inSwitzerland , but maintains the legal entity. (3)OnMarch 21, 2014 , the Company suspended operations in theUkraine , but maintains the legal entity,Mannatech Ukraine LLC .
Foreign Tax
Income from our international operations is subject to taxation in the countries in which we operate. Although we may receive foreign income tax credits that would reduce the total amount of income taxes owed inthe United States , we may not be able to fully utilize our foreign income tax credits inthe United States .U.S. Tax OnDecember 22, 2017 ,President Trump signed into law H.R. 1/Public Law No. 115-97, "An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018." Pursuant to ASC 740-10-25-47, the effects of the new federal legislation are recognized upon enactment, which is the date the president signs a bill into law. OnDecember 22, 2017 , theSEC staff issued Staff Accounting Bulletin ("SAB") 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act ("TCJA") ("SAB 118"), which provides guidance on accounting for the impact of the Act, in effect allowing an entity to use a methodology similar to the measurement period in a business combination. Pursuant to the disclosure provisions ofSAB 118, as ofSeptember 30, 2018 , the Company had completed its accounting for the tax effects of the Act. 48
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InFinancial Accounting Standards Board ("FASB") staff Q&A Topic 740, No. 5, Accounting for Global Intangible Low-Taxed Income, the FASB staff noted that ASC 740, Income Taxes ("Topic 740"), was not clear with respect to the appropriate accounting for Global Intangible Low-Taxed Income ("GILTI"), and accordingly, an entity may either: (1) elect to treat taxes on GILTI as period costs similar to special deductions, or (2) recognize deferred tax assets and liabilities when basis differences exist that are expected to affect the amount of GILTI inclusion upon reversal (the deferred method). The Company will account for GILTI in the year the tax is incurred as a period cost. We use the recognition and measurement provisions of Topic 740 to account for income taxes. The provisions of Topic 740 require a company to record a valuation allowance when the "more likely than not" criterion for realizing net deferred tax assets cannot be met. Furthermore, the weight given to the potential effect of such evidence should be commensurate with the extent to which it can be objectively verified. As a result, we reviewed the operating results, as well as all of the positive and negative evidence related to realization of such deferred tax assets to evaluate the need for a valuation allowance in each tax jurisdiction. As ofDecember 31, 2019 and 2018, we adjusted our valuation allowance for deferred tax assets in the following table (in millions), as we believe the "more likely than not" criterion for recognition and realization purposes, as defined in Topic 740, cannot be met. TheU.S. valuation allowance decreased due to the utilization of net operating losses in the current year. Country 2019 2018 Australia$ 0.2 $ 0.3 China 0.3 0.3 Colombia 0.6 0.6 Hong Kong - - Mexico 3.3 3.1 Norway 0.1 0.1 South Africa 0.2 0.2 Sweden - - Switzerland 0.5 - Taiwan 1.0 0.9 Ukraine 0.1 0.1 United Kingdom 0.1 0.1 United States 6.0 6.9 Other Jurisdictions - 0.2 Total$ 12.4 $ 12.8 For the years endedDecember 31, 2019 and 2018, the Company's effective tax rate was 42.5% and 894.7%, respectively. In 2019, the Company had a significant decrease in its rate due to the mix of earnings across jurisdictions. For 2018, the Company had a significant increase in its rate due to the mix of earnings across jurisdictions, valuation allowance recorded on losses in certain jurisdictions, and the impact of GILTI as a result of the TCJA passed in 2017. 49
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SEASONALITY
We believe the impact of seasonality on our consolidated results of operations is minimal. We have experienced and believe we will continue to experience variations on our quarterly results of operations in response to, among other things:
• the timing of the introduction of new products and incentives;
• our ability to attract and retain associates and preferred customers;
• the timing of our incentives and contests;
• the general overall economic outlook;
• government regulations;
• the outcome of certain lawsuits;
• the perception and acceptance of network marketing; and
• the consumer perception of our products and overall operations.
As a result of these and other factors, our quarterly results may vary
significantly in the future. Period-to-period comparisons should not be relied
upon as an indication of future performance since we can give no assurances that
revenue trends in new markets, as well as in existing markets, will follow our
historical patterns. The market price of our common stock may also be adversely
affected by the above factors.
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LIQUIDITY AND CAPITAL RESOURCES
Cash and Cash Equivalents
As ofDecember 31, 2019 , our cash, cash equivalents and restricted cash increased by 1.4%, or$0.4 million , to$31.0 million from$30.6 million as ofDecember 31, 2018 . The Company is required to restrict cash for (i) direct selling insurance premiums and credit card sales in theRepublic of Korea ; (ii) reserve on credit card sales inthe United States andCanada ; and (iii)Australia building lease collateral. The current portion of restricted cash atDecember 31, 2019 and 2018 was$0.9 million and$1.5 million , respectively. Fluctuations in currency rates produced a decrease of$0.6 million in cash and cash equivalents in 2019 as compared to an increase of$1.6 million in 2018. Our principal use of cash is to pay for operating expenses, including commissions and incentives, capital assets, inventory purchases, and periodic cash dividends. We fund our business objectives, operations, and expansion of our operations through net cash flows from operations rather than incurring long-term debt.
Working Capital
Working capital represents total current assets less total current liabilities. AtDecember 31, 2019 , our working capital increased by$3.3 million , or 37.5%, to$12.1 million from$8.8 million atDecember 31, 2018 . The increase in working capital is primarily due to decreases in accounts payable.
Net Cash Flows
Our net consolidated cash flows consisted of the following, for the years ended
Provided by / (used in): 2019 2018 Operating activities$ 4.9 $ (0.2 ) Investing activities$ (1.2 ) $ (2.3 ) Financing activities$ (2.7 ) $ (12.1 ) Operating Activities Cash provided by operating activities increased by$5.1 million for the year endedDecember 31, 2019 , as compared to the same period in 2018. For the year endedDecember 31, 2019 , sources of cash include our profits and working capital management. Investing Activities For the year endedDecember 31, 2019 , our investing activities used cash of$1.2 million , as compared to cash used of$2.3 million for the same period of 2018. During the year endedDecember 31, 2019 , we invested$0.8 million in computer hardware and software and$0.4 million for leasehold improvements in various international offices and training centers. During the year endedDecember 31, 2018 , we invested$2.2 million in computer hardware and software,$1.9 million in leasehold improvements and$0.5 million in office furniture and equipment as we moved our corporate headquarters to a new building. Of this$4.6 million investment,$2.3 million was funded from a capital financing agreement.
Financing Activities
For the year endedDecember 31, 2019 , our financing activities used cash of$2.7 million compared to cash used of$12.1 million for the same period of 2018. For the year endedDecember 31, 2019 , we used approximately$1.2 million in the repayment of finance lease obligations and other long term liabilities,$1.2 million in the payment of dividends to shareholders, and$0.3 million in the repurchase of common stock. For the year endedDecember 31, 2018 , we used cash of approximately$1.5 million to repay capital lease obligations,$3.1 million for payment of dividends to shareholders, and$7.5 million for the repurchase of common stock, which was partially offset by cash provided by the exercise of stock options. 51
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General Liquidity and Cash Flows
Short Term Liquidity
We believe our existing liquidity and cash flows from operations are adequate to fund our normal expected future business operations for the next 12 months. As our primary source of liquidity is our cash flows from operations, this will be dependent on our ability to maintain and/or continue to improve revenue as compared to our operational expenses. However, if our existing capital resources or cash flows become insufficient to meet current business plans, projections, and existing capital requirements, we may be required to raise additional funds, which may not be available on favorable terms, if at all. As ofDecember 31, 2019 and 2018, cash and cash equivalents held in bank accounts in foreign countries totaled$18.2 million and$19.9 million , respectively. We are engaged in ongoing audits in various tax jurisdictions and other disputes in the normal course of business. It is impossible at this time to predict whether we will incur any liability, or to estimate the ranges of damages, if any, in connection with these matters. Adverse outcomes on these uncertainties may lead to substantial liability or enforcement actions that could adversely affect our cash position. Additionally, COVID-19 could adversely impact our workforce, supply chain or demand for our products and therefore, our liquidity in the next twelve months, however, such impact is currently unknown. For more information, see Note 7 Income Taxes, Note 12 Litigation and Note 16 Subsequent Events to our Consolidated Financial Statements.
Long Term Liquidity
We believe our cash flows from operations should be adequate to fund our normal
expected future business operations and possible international expansion costs
for the long term. As our primary source of liquidity is from our cash flows
from operations, this will be dependent on our ability to maintain and and/or
improve revenue as compared to operational expenses.
However, if our existing capital resources or cash flows become insufficient to
meet anticipated business plans and existing capital requirements, we may be
required to raise additional funds, which may not be available on favorable
terms, if at all.
Our future access to the capital markets may be adversely impacted if we fail to
maintain compliance with the Nasdaq Marketplace Rules for the continued listing
of our stock. We continuously monitor our compliance with the Nasdaq continued
listing rules.
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CONTRACTUAL OBLIGATIONS
The following summarizes our future commitments and obligations associated with various agreements and contracts as ofDecember 31, 2019 , for the years endingDecember 31 (in thousands): 2020 2021 2022 2023 2024 Thereafter Total Finance lease obligations$ 104 $ 90 $ 64 $ 36 $ 10 $ -$ 304 Purchase obligations (1)(2) 5,167 67 67 - - - 5,301 Operating leases 2,131 1,592 1,145 606
613 2,139 8,226 Note payable and other financing arrangements 778 370 - - - - 1,148 Employment agreements 440 - - - - - 440 Royalty agreement 59 7 - - - - 66 Tax liability (3) - - - - - 191 191 Other obligations (4) 222 32 178 24 119 475 1,050 Total commitments and obligations$ 8,901 $ 2,158 $ 1,454 $ 666 $
742
(1)For purposes of the table, a purchase obligation is defined as an agreement to purchase goods or services that is non-cancelable, enforceable and legally binding on the Company that specifies all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. (2)Excludes approximately$12.1 million of finished product purchase orders that may be canceled or with delivery dates that have changed as ofDecember 31, 2019 . (3)Represents the tax liability associated with uncertain tax positions, see Note 7 to our Consolidated Financial Statements, Income Taxes to our consolidated financial statements. (4)Other obligations are composed of pension obligations related to the Company's international operations (approximately$0.8 million ) and lease restoration obligations (approximately$0.3 million ). We have maintained purchase commitments with certain raw material suppliers to purchase minimum quantities and to ensure exclusivity of our raw materials and the proprietary nature of our products. Currently, we have one supply agreement that requires minimum purchase commitments. We also maintain other supply agreements and manufacturing agreements to protect our products, regulate product costs, and help ensure quality control standards. These agreements do not require us to purchase any set minimums. We have no present commitments or agreements with respect to acquisitions or purchases of any manufacturing facilities; however, management from time to time explores the possibility of the benefits of purchasing a raw material manufacturing facility to help control costs of our raw materials and help ensure quality control standards.
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any special-purpose entity arrangements, nor do we have any off-balance sheet arrangements.
MARKET RISKS
Please see "Quantitative and Qualitative Disclosure about Market Risk" under Item 7A of this Form 10-K for additional information about our Market Risks.
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CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our consolidated financial statements are prepared in accordance with accounting principles generally accepted inthe United States of America ("GAAP"). The application of GAAP requires us to make estimates and assumptions that affect the reported values of assets and liabilities at the date of our financial statements, the reported amounts of revenues and expenses during the reporting period, and the related disclosures of contingent assets and liabilities. We use estimates throughout our financial statements, which are influenced by management's judgment and uncertainties. Our estimates are based on historical trends, industry standards, and various other assumptions that we believe are applicable and reasonable under the circumstances at the time the consolidated financial statements are prepared. Our Audit Committee reviews our critical accounting policies and estimates. We continually evaluate and review our policies related to the portrayal of our consolidated financial position and consolidated results of operations that require the application of significant judgment by our management. We also analyze the need for certain estimates, including the need for such items as allowance for doubtful accounts, inventory reserves, long-lived fixed assets and capitalization of internal-use software development costs, reserve for uncertain income tax positions and tax valuation allowances, revenue recognition, sales returns, and deferred revenues, accounting for stock-based compensation, and contingencies and litigation. Historically, actual results have not materially deviated from our estimates. However, we caution readers that actual results could differ from our estimates and assumptions applied in the preparation of our consolidated financial statements. If circumstances change relating to the various assumptions or conditions used in our estimates, we could experience an adverse effect on our financial position, results of operations, and cash flows. We have identified the following applicable critical accounting policies and estimates as ofDecember 31, 2019 :
Inventory Reserves
Inventory consists 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. We record the amounts charged by the vendors as the costs of inventory. Typically, the net realizable value of our inventory is higher than the aggregate cost. Determination of net realizable value can be complex and, therefore, requires a high degree of judgment. In order for management to make the appropriate determination of net realizable value, the following items are considered: inventory turnover statistics, current selling prices, seasonality factors, consumer demand, regulatory changes, competitive pricing, and performance of similar products. If we determine the carrying value of inventory is in excess of estimated net realizable value, we write down the value of inventory to the estimated net realizable value. We also review inventory for obsolescence in a similar manner and any inventory identified as obsolete is reserved or written off. Our determination of obsolescence is based on assumptions about the demand for our products, product expiration dates, estimated future sales, and general future plans. We monitor actual sales compared to original projections, and if actual sales are less favorable than those originally projected by us, we record an additional inventory reserve or write-down. Historically, our estimates have been close to our actual reported amounts. However, if our estimates regarding inventory obsolescence are inaccurate or consumer demand for our products changes in an unforeseen manner, we may be exposed to additional material losses or gains in excess of our established estimated inventory reserves. AtDecember 31, 2019 and 2018, our inventory reserves were$0.9 million and$0.5 million , respectively.
Long Lived Fixed Assets and Capitalization of Software Development Costs
In addition to capitalizing long-lived fixed asset costs, we also capitalize
costs associated with internally developed software projects (collectively
"fixed assets") and amortize such costs over the estimated useful lives of such
fixed assets. Fixed assets are carried at cost less accumulated depreciation
computed using the straight-line method over the assets' estimated useful lives.
Leasehold improvements are amortized over the shorter of the remaining lease
terms or the estimated useful lives of the improvements. Expenditures for
maintenance and repairs are charged to operations as incurred. If a fixed asset
is sold or otherwise retired or disposed of, the cost of the fixed asset and the
related accumulated depreciation or amortization is written off and any
resulting gain or loss is recorded in other operating costs in our consolidated
statement of operations.
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We review our fixed assets for impairment whenever an event or change in circumstances indicates the carrying amount of an asset or group of assets may not be recoverable, such as plans to dispose of an asset before the end of its previously estimated useful life. Our impairment review includes a comparison of future projected cash flows generated by the asset, or group of assets, with its associated net carrying value. If the net carrying value of the asset or group of assets exceeds expected cash flows (undiscounted and without interest charges), an impairment loss is recognized to the extent the carrying amount exceeds the fair value. The fair value is determined by calculating the discounted expected future cash flows using an estimated risk-free rate of interest. Any identified impairment losses are recorded in the period in which the impairment occurs. The carrying value of the fixed asset is adjusted to the new carrying value and any subsequent increases in fair value of the fixed asset are not recorded. In addition, if we determine the estimated remaining useful life of the asset should be reduced from our original estimate, the periodic depreciation expense is adjusted prospectively, based on the new remaining useful life of the fixed asset. The impairment calculation requires us to apply judgment and estimates concerning future cash flows, strategic plans, useful lives, and discount rates. If actual results are not consistent with our estimates and assumptions, we may be exposed to an additional impairment charge, which could be material to our results of operations. In addition, if accounting standards change, or if fixed assets become obsolete, we may be required to write off any unamortized costs of fixed assets; or if estimated useful lives change, we would be required to accelerate depreciation or amortization periods and recognize additional depreciation expense in our consolidated statement of operations. Historically, our estimates and assumptions related to the carrying value and the estimated useful lives of our fixed assets have not materially deviated from actual results. As ofDecember 31, 2019 , the estimated useful lives and net carrying values of fixed assets are as follows: Net carrying value at EstimatedDecember 31 , useful life 2019 Office furniture and equipment 5 to 7 years$0.9
million
Computer hardware and software 3 to 5 years 2.5 million
Automobiles 3 to 5 years 0.1 million
2 to 10
Leasehold improvements(1) years 1.8 million
Total net carrying value at December 31, 2019 $5.3 million
(1) We amortize leasehold improvements over the shorter of the useful estimated life of the leased asset or the lease term.
The net carrying costs of fixed assets and construction in progress are exposed to impairment losses if our assumptions and estimates of their carrying values change, there is a change in estimated future cash flow, or there is a change in the estimated useful life of the fixed asset. Based on management's analysis, no material impairments existed during the year endedDecember 31, 2019 . During the year endedDecember 31, 2018 , no material impairments existed. 55
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Uncertain Income Tax Positions and Tax Valuation Allowances
As ofDecember 31, 2019 , we recorded$0.2 million in other long-term liabilities on our consolidated balance sheet related to uncertain income tax positions. As required by FASB ASC Topic 740, Income Taxes, we use judgments and make estimates and assumptions related to evaluating the probability of uncertain income tax positions. We base our estimates and assumptions on the potential liability related to an assessment of whether the income tax position will "more likely than not" be sustained in an income tax audit. We are also subject to periodic audits from multiple domestic and foreign tax authorities related to income tax and other forms of taxation. These audits examine our tax positions, timing of income and deductions, and allocation procedures across multiple jurisdictions. Depending on the nature of the tax issue, we could be subject to audit over several years. Therefore, our estimated reserve balances and liability related to uncertain income tax positions may exist for multiple years before the applicable statute of limitations expires or before an issue is resolved by the taxing authority. Additionally, we may be requested to extend the statute of limitations for tax years under audit. It is reasonably possible the tax jurisdiction may request that the statute of limitations be extended, which may cause the classification between current and long-term to change. We believe our tax liabilities related to uncertain tax positions are based upon reasonable judgment and estimates; however, if actual results materially differ, our effective income tax rate and cash flows could be affected in the period of discovery or resolution. There are ongoing income tax audits in various international jurisdictions that we believe are not material to our financial statements. We also review the estimates and assumptions used in evaluating the probability of realizing the future benefits of our deferred tax assets and record a valuation allowance when we believe that a portion or all of the deferred tax assets may not be realized. If we are unable to realize the expected future benefits of our deferred tax assets, we are required to provide a valuation allowance. We use our past history and experience, overall profitability, future management plans, and current economic information to evaluate the amount of valuation allowance to record. As ofDecember 31, 2019 , we maintained a valuation allowance for deferred tax assets arising from our operations of$12.4 million because they did not meet the "more likely than not" criteria as defined by the recognition and measurement provisions of FASB ASC Topic 740, Income Taxes. In addition, as ofDecember 31, 2019 , we had net deferred tax assets, after valuation allowance, totaling$0.9 million , which may not be realized if our assumptions and estimates change, which would affect our effective income tax rate and cash flows in the period of discovery or resolution. InFebruary 2018 , the FASB issued Accounting Standards Update ("ASU") No. 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220) ("ASU 2018-02"). The guidance in ASU 2018-02 allows an entity to elect to reclassify the stranded tax effects related to the Act from accumulated other comprehensive income into retained earnings. ASU 2018-02 is effective for fiscal years beginning afterDecember 15, 2018 , with early adoption permitted. The adoption of this standard had no impact on our consolidated financial statements.
Revenue Recognition
Our revenue is derived from sales of individual products and associate fees or,
in certain geographic markets, starter and renewal packs. 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.
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 TrackerTM 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.
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With regard 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. Deferred Commissions We defer commissions on (i) the sales of products shipped but not received by the 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$1.8 million and$2.4 million atDecember 31, 2019 andDecember 31, 2018 , respectively.
Deferred Revenue
We defer certain components of revenue. Deferred revenue consists of: (i) sales of products shipped but not received by the 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. AtDecember 31, 2019 andDecember 31, 2018 , deferred revenue was$4.4 million and$5.3 million , respectively. Our 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 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 atDecember 31, 2019 andDecember 31, 2018 was$3.1 million and$4.2 million , respectively. Loyalty program (in thousands)
Loyalty deferred revenue as of
(4,332 )
Loyalty points used (11,398 )
Loyalty points vested 12,469
Loyalty points unvested 1,086
Loyalty deferred revenue as of
Loyalty deferred revenue as of
(4,348 )
Loyalty points used (9,127 )
Loyalty points vested 11,320
Loyalty points unvested 1,051
Loyalty deferred revenue as of
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Product Return Policy
We stand behind our packs and products and believe we offer a reasonable and industry-standard product return policy to all of our customers. We do not resell returned products. Refunds are not processed until proper approval is obtained. Refunds are processed and returned in the same form of payment that was originally used in the sale. Each country in which we operate has specific product return guidelines. However, we allow our associates and preferred customers to exchange products as long as the products are unopened and in good condition. Our return policies for our retail customers and our associates and preferred customers are as follows:
• Retail Customer Product Return Policy. This policy allows a retail
customer to return any of our products to the original associate who sold
the product and receive a full cash refund from the associate for the
first 180 days following the product's purchase if located in the United
States and
purchase in other countries where we sell our products. In
we sell our products under a cross-border e-commerce model, we have a
14-day return policy. The associate may then return or exchange the
product based on the associate product return policy.
• Associate and Preferred Customer Product Return Policy. This policy
allows the associate or preferred customer to return an order within one
year of the purchase date upon terminating his/her account. If an
associate or preferred customer returns a product unopened and in good
condition, he/she may receive a full refund minus a 10% restocking fee.
We may also allow the associate or preferred customer to receive a fullsatisfaction guarantee refund if they have tried the product and are not
satisfied for any reason, excluding promotional materials. This
satisfaction guarantee refund applies in
only for the first 180 days following the product's purchase, and applies
in other countries where we sell our products for the first 90 days
following the product's purchase; however, any commissions earned by an
associate will be deducted from the refund. If we discover abuse of therefund policy, we may terminate the associate's or preferred customer's
account.
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 estimates have not materially deviated from actual sales returns, as the majority of our customers who return 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 years endedDecember 31, 2019 andDecember 31, 2018 , our sales return reserve was composed of the following (in thousands): Sales reserve as of January 1, 2018$ 117
Provision related to sales made in current period 1,198
Adjustment related to sales made in prior periods (10 )
Actual returns or credits related to current period (1,125 )
Actual returns or credits related to prior periods (104 )
Sales reserve as of
$ 76 Sales reserve as of January 1, 2019$ 76
Provision related to sales made in current period 1,037
Adjustment related to sales made in prior periods 31
Actual returns or credits related to current period (973 )
Actual returns or credits related to prior periods (103 )
Sales reserve as of
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Accounting for Stock-Based Compensation
We grant stock options to our employees, board members, and consultants. At the date of grant, we determine the fair value of a stock option award and recognize compensation expense over the requisite service period, or the vesting period of such stock option award, which is two or three years. The fair value of the stock option award is calculated using the Black-Scholes option-pricing model (the "calculated fair value"). The Black-Scholes option-pricing model requires us to apply judgment and use highly subjective assumptions, including expected stock option life, expected volatility, expected average risk-free interest rates, and expected forfeiture rates. For the year endedDecember 31, 2019 , our assumptions and estimates used for the calculated fair value of stock options granted in 2019 were as follows: 2019 Grants June
Estimated fair value per share of options granted:
7.5 %
Risk-free rate of return 1.9 %
Common stock price volatility 47.6 %
Expected average life of stock options (in years) 4.5
Historically, our estimates and underlying assumptions have not materially deviated from our actual reported results and rates. However, we base assumptions we use on our best estimates, which involves inherent uncertainties based on market conditions that are outside of our control. If actual results are not consistent with the assumptions we use, the stock-based compensation expense reported in our consolidated financial statements may not be representative of the actual economic cost of stock-based compensation. For example, if actual employee forfeitures significantly differ from our estimated forfeitures, we may be required to adjust our consolidated financial statements in future periods. As ofDecember 31, 2019 , using our current assumptions and estimates, we anticipate recognizing$0.1 million in gross compensation expense through 2020 related to unvested stock options outstanding. If we grant additional stock options in the future, we would be required to recognize additional compensation expense over the vesting period of such stock options in our consolidated statement of operations. As ofDecember 31, 2019 , we had 162,767 shares available for grant in the future.
Contingencies and Litigation
Each quarter, we evaluate the need to establish a reserve for any legal claims
or assessments. We base our evaluation on our best estimates of the potential
liability in such matters. The legal reserve includes an estimated amount for
any damages and the probability of losing any threatened legal claims or
assessments. The legal reserve is developed in consultation with our general and
outside counsel and is based upon a combination of litigation and settlement
strategies. Although we believe that our legal reserves and accruals are based
on reasonable judgments and estimates, actual results could differ, which may
expose us to material gains or losses in future periods. If actual results
differ, if circumstances change, or if we experience an unanticipated adverse
outcome of any legal action, including any claim or assessment, we would be
required to recognize the estimated amount that could reduce net income,
earnings per share, and cash flows.
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RECENT ACCOUNTING PRONOUNCEMENTS
InJune 2016 , the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). This standard adds toU.S. GAAP an impairment model (known as the current expected credit loss ("CECL") model) that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses, which is intended to result in the more timely recognition of losses. Under the CECL model, entities will estimate credit losses over the entire contractual term of the instrument (considering estimated prepayments, but not expected extensions or modifications) from the date of initial recognition of the financial instrument. Measurement of expected credit losses are to be based on relevant forecasts that affect collectability. The scope of financial assets within the CECL methodology is broad and includes trade receivables from certain revenue transactions and certain off-balance sheet credit exposures. Different components of the guidance require modified retrospective or prospective adoption. ASU 2019-10 deferred the effective date of ASU 2016-13 for all entities exceptSEC filers that are not smaller reporting companies. This standard will be effective for us as ofJanuary 1, 2023 . While our review is ongoing, we believe ASU 2016-13 will only have applicability to our receivables from revenue transactions. Under ASC 606, revenue is recognized when, among other criteria, it is probable that the entity will collect the consideration to which it is entitled for goods or services transferred to a customer. At the point that trade receivables are recorded, they become subject to the CECL model and estimates of expected credit losses on trade receivables over their contractual life will be required to be recorded at inception based on historical information, current conditions, and reasonable and supportable forecasts. The Company is currently evaluating whether the new guidance will have an impact on our consolidated financial statements or existing internal controls. See Note 1 to our Consolidated Financial Statements for further information on recent accounting pronouncements. 60
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We do not engage in trading market risk sensitive instruments and do not purchase investments as hedges or for purposes "other than trading" that are likely to expose us to certain types of market risk, including interest rate, commodity price, or equity price risk. Although we have investments, we believe there has been no material change in our exposure to interest rate risk. We have not issued any debt instruments, entered into any forward or futures contracts, purchased any options, or entered into any swap agreements. We are exposed, however, to other market risks, including changes in currency exchange rates as measured againstthe United States dollar. Because the change in value ofthe United States dollar measured against foreign currency may affect our consolidated financial results, changes in foreign currency exchange rates could positively or negatively affect our results as expressed inUnited States dollars. For example, whenthe United States dollar strengthens against foreign currencies in which our products are sold or weakens against foreign currencies in which we may incur costs, our consolidated net sales or related costs and expenses could be adversely affected. We translate our revenues and expenses in foreign markets using an average rate. We believe inflation has not had a material impact on our consolidated operations or profitability. We maintain policies, procedures, and internal processes in an effort to help monitor any significant market risks and we do not use any financial instruments to manage our exposure to such risks. We assess the anticipated foreign currency working capital requirements of our foreign operations and maintain a portion of our cash and cash equivalents denominated in foreign currencies sufficient to satisfy most of these anticipated requirements. We caution that we cannot predict with any certainty our future exposure to such currency exchange rate fluctuations or the impact, if any, such fluctuations may have on our future business, product pricing, operating expenses, and on our consolidated financial position, results of operations, or cash flows. However, to combat such market risk, we closely monitor our exposure to currency fluctuations. The regions and countries in which we currently have exposure to foreign currency exchange rate risk include (i)North America /South America (Canada ,Colombia andMexico ); (ii) EMEA (Austria , theCzech Republic ,Denmark ,Estonia ,Finland ,Germany , theRepublic of Ireland ,the Netherlands ,Norway ,South Africa ,Spain ,Sweden ,Switzerland and theUnited Kingdom ); (iii)Asia/Pacific (Australia ,Japan ,New Zealand , theRepublic of Korea ,Singapore ,Taiwan ,Hong Kong andChina ). The current (spot) rate, average currency exchange rates, and the low and high of such currency exchange rates as compared tothe United States dollar, for each of these countries as of and for the year endedDecember 31, 2019 were as follows: As of December 31, Year ended December 31, 2019 2019 Country (foreign currency name) Low High Average Spot Australia (Australian Dollar) 0.67020 0.72704 0.69558 0.69952 Canada (Canadian Dollar) 0.73332 1.34930 0.80226 0.76535 China (Renminbi) 0.13932 0.14961 0.14485 0.14314 Columbia (Peso) 0.00029 0.00032 0.00031 0.00030 Czech Republic (Koruna) 0.04229 0.04504 0.04364 0.04404 Denmark (Kroner) 0.14614 0.15446 0.14999 0.14995 Hong Kong (Hong Kong Dollar) 0.12739 0.12844 0.12764 0.12842 Japan (Yen) 0.00893 0.00950 0.00918 0.00917 Mexico (Peso) 0.04965 0.05337 0.05198 0.05304 New Zealand (New Zealand Dollar) 0.62378 0.69141 0.65938 0.67226 Norway (Krone) 0.10827 0.11881 0.11380 0.11361 Republic of Korea (Won) 0.00082 0.00090 0.00086 0.00086 Singapore (Singapore Dollar) 0.71837 0.74303 0.73325 0.74127 South Africa (Rand) 0.06502 0.07520 0.06934 0.07118 Sweden (Krona) 0.10056 0.11329 0.10590 0.10723 Switzerland (Franc) 0.97986 1.02998 1.00667 1.02998 Taiwan (New Taiwan Dollar) 0.03161 0.03332 0.03238 0.03328 United Kingdom (British Pound) 1.20348 1.33940 1.27714 1.31181 Various countries (1) (Euro ) 1.09099 1.15307 1.11976 1.12000
(1)
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