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border-bottom: #000000 2px solid; text-align: left; width: 1%; background-color: #ffffff;">&#160;</td><td valign="bottom" style="vertical-align: bottom; border-bottom: #000000 2px solid; text-align: right; width: 9%; background-color: #ffffff;"><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif;">&#8212;</div></td><td nowrap="nowrap" valign="bottom" style="vertical-align: bottom; padding-bottom: 2px; text-align: left; width: 1%; background-color: #ffffff;">&#160;</td><td valign="bottom" style="vertical-align: bottom; padding-bottom: 2px; width: 1%; background-color: #ffffff;">&#160;</td><td valign="bottom" style="vertical-align: bottom; border-bottom: #000000 2px solid; text-align: left; width: 1%; background-color: #ffffff;">&#160;</td><td valign="bottom" style="vertical-align: bottom; border-bottom: #000000 2px solid; text-align: right; width: 9%; background-color: #ffffff;"><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif;">&#8212;</div></td><td nowrap="nowrap" valign="bottom" style="vertical-align: bottom; padding-bottom: 2px; text-align: left; width: 1%; background-color: #ffffff;">&#160;</td><td valign="bottom" style="vertical-align: bottom; padding-bottom: 2px; width: 1%; background-color: #ffffff;">&#160;</td><td valign="bottom" style="vertical-align: bottom; border-bottom: #000000 2px solid; text-align: left; width: 1%; background-color: #ffffff;">&#160;</td><td valign="bottom" style="vertical-align: bottom; border-bottom: #000000 2px solid; text-align: right; width: 9%; background-color: #ffffff;"><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif;">3,716</div></td><td nowrap="nowrap" valign="bottom" style="vertical-align: bottom; padding-bottom: 2px; text-align: left; width: 1%; background-color: #ffffff;">&#160;</td></tr><tr><td valign="bottom" style="vertical-align: top; padding-bottom: 4px; width: 52%; background-color: #cceeff;"><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; text-align: left; margin-left: 7.2pt; text-indent: -7.2pt;">Total</div></td><td valign="bottom" style="vertical-align: bottom; 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padding-bottom: 4px; text-align: left; width: 1%; background-color: #cceeff;">&#160;</td><td valign="bottom" style="vertical-align: bottom; padding-bottom: 4px; width: 1%; background-color: #cceeff;">&#160;</td><td valign="bottom" style="vertical-align: bottom; border-bottom: #000000 4px double; text-align: left; width: 1%; background-color: #cceeff;"><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif;">$</div></td><td valign="bottom" style="vertical-align: bottom; border-bottom: #000000 4px double; text-align: right; width: 9%; background-color: #cceeff;"><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif;">3,908</div></td><td nowrap="nowrap" valign="bottom" style="vertical-align: bottom; padding-bottom: 4px; text-align: left; width: 1%; background-color: #cceeff;">&#160;</td></tr></table></div> 5000000 5600000 1700000 1900000 -63000 1000 25669000 28240000 8497000 8640000 105283000 105338000 35207000 34351000 1385000 -1857000 179000 1550000 <div style="font-family: 'Times New Roman', Times, serif; font-size: 10pt;"><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; font-weight: bold; text-align: justify;">NOTE 3: INCOME TAXES</div><div><br /></div><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; text-align: justify; text-indent: 36pt;">For the three and nine months ended September 30, 2013, the Company&#8217;s effective tax rate was 548.26% and 54.72%, respectively. For the three and nine months ended September 30, 2012, the Company&#8217;s effective income tax rate was 42.8% and 11.6%, respectively. For the three and nine months ended September 30, 2013 and 2012, the Company&#8217;s effective tax rate was determined based on the estimated annual effective tax rate.</div><div><br /></div><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; text-align: justify; text-indent: 36pt;">The examination of our 2005-2009 tax years by the IRS for U.S. federal tax purposes was settled during the second quarter of 2013. In connection with the audit, the IRS and the Company agreed to a net tax deficiency of $0.8 million and the payment of interest accrued through June 30, 2013 of $0.2 million, without any penalties. The tax payment and related interest were made during the third quarter of 2013. In connection with the settlement of the audit, the Company reclassified amounts owed to the IRS and previously recorded as uncertain tax positions as taxes payable, resulting in a $1.0 million tax benefit through September 30, 2013.</div><div><br /></div><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; text-align: justify; text-indent: 36pt;">Excluding the release of uncertain income tax positions in connection with the settlement of the IRS audit, the effective tax rate for the three and nine months ended September 30, 2013 would have been 1,122.52% and 128.78%. These rates are higher than what would have been expected if the federal statutory income tax rate were applied to income before taxes primarily from the unfavorable differences from foreign operations.</div><div><br /></div><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; text-align: justify; text-indent: 36pt;">On July 11, 2013, the Company was issued an assessment notice from the Busan Custom Office in Korea in the amount of KRW 2,147,034,680 (approximately $1.9 million) resulting from an audit covering fiscal years 2008 through 2012. At September 30, 2013, we have recorded $0.9 million in taxes payable on our consolidated balance sheet related to this assessment, with $0.5 million related to customs charges being recorded as cost of sales and $0.4 million related to surtaxes on customs and VAT being recorded as other expense. An additional amount of approximately $0.7 million is recoverable VAT, which has no effect on the Company&#8217;s statement of operations. 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The Company periodically reviews inventories for obsolescence, and any inventories identified as obsolete are reserved or written off.</div></div> 6071000 4766000 31777000 24783000 48122000 55042000 27901000 34076000 1000000 -1761000 -518000 -1135000 -816000 8215000 -3108000 627000 0 627000 0 0 0 -1642000 -801000 2213000 <div style="font-family: 'Times New Roman', Times, serif; font-size: 10pt;"><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; font-weight: bold; text-align: justify;">NOTE 8: RECENT ACCOUNTING PRONOUNCEMENTS</div><div><br /></div><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; text-align: justify; text-indent: 36pt;">In February 2013, the Financial Accounting Standards Board (&#8220;FASB&#8221;) issued Accounting Standards Update (&#8220;ASU&#8221;) No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. Under this standard, entities will be required to disclose additional information with respect to changes in accumulated other comprehensive income (&#8220;AOCI&#8221;) balances by component and significant items reclassified out of AOCI. Expanded disclosures for presentation of changes in AOCI involve disaggregating the total change of each component of other comprehensive income (for example, unrealized gains or losses on available for sale marketable securities) as well as presenting separately for each such component the portion of the change in AOCI related to (1) amounts reclassified into income and (2) current-period other comprehensive income. Additionally, for amounts reclassified into income, disclosure in one location would be required, based upon each specific AOCI component, of the amounts impacting individual income statement line items. Disclosure of the income statement line item impacts will be required only for components of AOCI reclassified into income in their entirety. This ASU is effective beginning January 1, 2013. Because this standard only impacts presentation and disclosure requirements, its adoption did not have a material impact on the Company&#8217;s consolidated results of operations or financial condition. No additional disclosures were presented during the quarter as there were no material reclassifications from AOCI during the periods presented.</div></div> 685000 11 1 2005 2009 102649000 107711000 34778000 33262000 2634000 -2373000 429000 1089000 <div style="font-family: 'Times New Roman', Times, serif; font-size: 10pt;"><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; font-weight: bold; text-align: justify; text-indent: 36pt;">NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</div><div><br /></div><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; text-align: justify; text-indent: 36pt;">Mannatech, Incorporated (together with its subsidiaries, the &#8220;Company&#8221;), located in Coppell, Texas, was incorporated in the state of Texas on November 4, 1993 and is listed on the NASDAQ Global Select Market (&#8220;Nasdaq&#8221;) under the symbol &#8220;MTEX&#8221;. The Company develops, markets, and sells high-quality, proprietary nutritional supplements, topical and skin care products, and weight-management products.&#160;The Company&#160;currently&#160;sells&#160;its&#160;products in three regions: (i) North America (the United States, Canada, and Mexico); (ii) Europe/the Middle East/Africa (&#8220;EMEA&#8221;) (Austria, the Czech Republic, Denmark, Estonia, Finland, Germany, the Republic of Ireland, Namibia, the Netherlands, Norway, South Africa, Sweden, Ukraine, and the United Kingdom); (iii) Asia/Pacific (Australia, Hong Kong, Japan, New Zealand, the Republic of Korea, Singapore, and Taiwan). In December 2012, the Company commenced the shipment of its products to Hong Kong and officially launched Hong Kong operations in April 2013. In November 2012, the Company commenced the shipment of its products to Ukraine and officially launched Ukrainian operations in July 2013.</div><div><br /></div><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; text-align: justify; text-indent: 36pt;">Independent associates (&#8220;associates&#8221;) purchase the Company&#8217;s products at published wholesale prices to either sell to retail customers or for personal use. Members purchase the Company&#8217;s products at a discount from published retail prices primarily for personal use. The Company cannot distinguish products sold for personal use from other sales 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.</div><div><br /></div><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; text-align: justify; text-indent: 36pt;">The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with instructions for Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, the Company&#8217;s consolidated financial statements and footnotes contained herein do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America (&#8220;GAAP&#8221;) to be considered &#8220;complete financial statements&#8221;. However, in the opinion of the Company&#8217;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&#8217;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, 2012 consolidated balance sheet was included in the audited consolidated financial statements in the Company&#8217;s annual report on Form 10-K for the year ended December 31, 2012 and filed with the United States Securities and Exchange Commission (the &#8220;SEC&#8221;) on March 28, 2013 (the &#8220;2012 Annual Report&#8221;), 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 2012 Annual Report.</div><div><br /></div><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; font-weight: bold; font-style: italic; text-align: justify; text-indent: 36pt;">Principles of Consolidation</div><div><br /></div><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; text-align: justify; text-indent: 36pt;">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.</div><div><br /></div><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; font-weight: bold; font-style: italic; text-align: justify; text-indent: 36pt;">Reclassifications</div><div><br /></div><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; text-align: justify; text-indent: 36pt;">Certain reclassifications have been made to the financial statements for prior periods to conform to the current period presentation.</div><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; font-weight: bold; text-align: center; text-indent: 36pt;">&#160;</div><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; font-weight: bold; font-style: italic; text-align: justify; text-indent: 36pt;">Use of Estimates</div><div><br /></div><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; text-align: justify; text-indent: 36pt;">The preparation of the Company&#8217;s consolidated financial statements in accordance with generally accepted accounting principles 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&#8217;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.</div><div><br /></div><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; text-align: justify; text-indent: 36pt;">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, <font style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; font-style: italic;">Organization and Summary of Significant Accounting Policies</font>.</div><div><br /></div><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; font-weight: bold; font-style: italic; text-align: justify; text-indent: 36pt;">Cash and Cash Equivalents</div><div><br /></div><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; text-align: justify; text-indent: 36pt;">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 of submission to the credit card processor. Credit card receivables were $3.3 million at September 30, 2013 and $1.7 million at December 31, 2012. Cash and cash equivalents held in bank accounts in foreign countries totaled $14.3 million and $10.8 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.</div><div><br /></div><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; font-weight: bold; font-style: italic; text-align: justify; text-indent: 36pt;">Restricted Cash</div><div><br /></div><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; text-align: justify; text-indent: 36pt;">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 September 30, 2013 and December 31, 2012, our total restricted cash was $6.6 million and $5.3 million, respectively.</div><div><br /></div><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; font-weight: bold; font-style: italic; text-align: justify; text-indent: 36pt;">Accounts Receivable</div><div><br /></div><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; text-align: justify; text-indent: 36pt;">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 September 30, 2013 and December 31, 2012, receivables consisted primarily of amounts due from members and associates. 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. At each of September 30, 2013 and December 31, 2012, the Company held an allowance for doubtful accounts of less than $0.1 million.</div><div><br /></div><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; font-weight: bold; font-style: italic; text-align: justify; text-indent: 36pt;">Inventories</div><div><br /></div><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; text-align: justify; text-indent: 36pt;">Inventories consist of raw materials, finished goods, and promotional materials that are stated at the lower of cost or market (using standard costs that approximate average costs). The Company periodically reviews inventories for obsolescence, and any inventories identified as obsolete are reserved or written off.</div><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; font-weight: bold; text-align: center; text-indent: 36pt;">&#160;</div><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; font-weight: bold; font-style: italic; text-align: justify; text-indent: 36pt;">Other Assets</div><div><br /></div><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; text-align: justify; text-indent: 36pt;">As of September 30, 2013 and December 31, 2012, other assets were $2.9 million and $3.2 million, respectively, and primarily consisted of deposits for building leases in various locations of $1.5 million and $1.8 million, respectively. Additionally, included in the September 30, 2013 and December 31, 2012 balances was $1.0 million, representing a deposit with Mutual Aid Cooperative and Consumer in the Republic of Korea, an organization established by the Republic of Korea&#8217;s Fair Trade Commission to protect consumers who participate in network marketing activities. Also included in the September 30, 2013 and December 31, 2012 balances was $0.2 million of indefinite lived intangible assets relating to the Manapol &#174; powder trademark.</div><div><br /></div><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; font-weight: bold; font-style: italic; text-align: justify; text-indent: 36pt;">Other Long-Term Liabilities</div><div><br /></div><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; text-align: justify; text-indent: 36pt;">Certain operating leases for the Company&#8217;s regional office facilities contain a restoration clause that requires the Company to restore the premises to its original condition. As of September 30, 2013 and December 31, 2012, accrued restoration costs related to these leases amounted to $0.2 million and $0.5 million, respectively. Also included in long-term liabilities at September 30, 2013 and December 31, 2012 was an estimated defined benefit obligation related to a non-U.S. defined benefit plan for its Japan operations of $0.7 million.</div><div><br /></div><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; text-align: justify; text-indent: 36pt;">In August 2003, the Company entered into a Long-Term Post-Employment Royalty Agreement with Dr. Bill McAnalley, the Company&#8217;s former Chief Science Officer, pursuant to which the Company is required to pay Dr. McAnalley, or his heirs, royalties for ten years beginning September 2005 and continuing through August 2015. Quarterly payments related to this Long-Term Post-Employment Royalty Agreement are based on certain applicable annual global product sales by the Company in excess of $105.4 million. At the time the Company entered into this Long-Term Post-Employment Royalty Agreement, it was considered a post-employment benefit and the Company was required to measure and accrue the present value of the estimated future royalty payments related to this benefit and recognize it over the life of Dr. McAnalley&#8217;s employment agreement, which was two years. As of September 30, 2013 and December 31, 2012, the Company&#8217;s liability related to this royalty agreement was $0.1 million and $0.2 million, respectively.</div><div><br /></div><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; font-weight: bold; font-style: italic; text-align: justify; text-indent: 36pt;">Revenue Recognition and Deferred Commissions</div><div><br /></div><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; text-align: justify; text-indent: 36pt;">The Company&#8217;s revenue is derived from sales of individual products, sales of its starter and renewal packs, and shipping fees. Substantially all of the Company&#8217;s product and pack sales are made to associates at published wholesale prices and to members at discounted published retail prices. 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The deferred revenue associated with the loyalty program at September 30, 2013 was $2.5 million. Deferred revenue consisted primarily of: (i) sales of packs and products shipped but not received by the customers by the end of the respective period; (ii) revenue from the loyalty program and (iii) prepaid registration fees from customers planning to attend a future corporate-sponsored event. In total current assets, the Company defers commissions on (i) the sales of packs and products shipped but not received by the customers by the end of the respective period and (ii) the loyalty program. Deferred commissions were $2.2 million and $0.6 million at September 30, 2013 and December 30, 2012, respectively.</div><div><br /></div><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; text-align: justify; text-indent: 36pt;">We estimate a sales return reserve for expected sales refunds based on our historical experience over a rolling six-month period. If actual results differ from our estimated sales return reserve due to various factors, the amount of revenue recorded for each period could be materially affected. Historically, our 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. 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The Company records inbound freight as a component of inventory and cost of sales. To improve the matching of costs associated with the revenue from freight and shipping fees collected, beginning December 31, 2012, freight charges associated with shipping products to our customers were reclassified to cost of sales from selling and administrative expenses with prior periods&#8217; presentations adjusted accordingly. Total revenue from freight and shipping fees were approximately $1.9 million and $1.6 million for the three months ended September 30, 2013 and 2012, respectively, and $5.7 million and $4.6 million for the nine months ended September 30, 2013 and 2012, respectively. Total freight costs for shipping products to our customers included in cost of sales were approximately $1.7 million and $1.9 million for the three months ended September 30, 2013 and 2012, respectively, and $5.0 million and $5.6 million for the nine months ended September 30, 2013 and 2012, respectively.</div><div><br /></div><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; font-weight: bold; font-style: italic; text-align: justify; text-indent: 36pt;">Commissions and Incentives</div><div><br /></div><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; text-align: justify; text-indent: 36pt;">Associates earn commissions and incentives based on their direct and indirect commissionable net sales over 13 business periods each year. Each business period equals 28 days. The Company accrues commissions and incentives when earned by associates and pays commissions on product sales three weeks following the business period end and pays commissions on its pack sales five weeks following the business period end.</div><div><br /></div><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; text-align: justify; text-indent: 36pt;">In order to more closely conform to the financial presentation of our competitors, beginning December 31, 2012, commissions and incentive expenses were reclassified to operating expenses from cost of sales with prior periods&#8217; presentations adjusted accordingly. Total commissions and incentive expenses reclassified to operating expenses were approximately $19.6 million and $18.7 million for the three months ended September 30, 2013 and 2012, respectively, and $56.4 million and $56.3 million for the nine months ended September 30, 2013 and 2012, respectively.</div><div><br /></div><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; font-weight: bold; font-style: italic; text-align: justify; text-indent: 36pt;">Comprehensive Income (loss) and Accumulated Other Comprehensive Income (loss)</div><div><br /></div><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; text-align: justify; text-indent: 36pt;">Comprehensive income (loss) 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&#8217;s comprehensive income (loss) consists of the Company&#8217;s net income (loss), foreign currency translation adjustments from its Japan, Republic of Korea, Taiwan, Singapore, Norway, Sweden, Mexico, and Ukraine operations, and changes in the pension obligation for its Japanese employees.</div></div> 31000 31000 0 0 0 0 -542000 829000 -181000 3187000 2938000 3716000 0 0 3716000 0 3716000 0 3716000 2487000 3614000 18919000 19109000 6167000 5261000 -1278000 542000 -275000 455000 2178000 1706000 700000 700000 0 3000 524000 273000 200000 100000 0.01 0.01 0 0 0 0 1000000 1000000 0 0 <div style="font-family: 'Times New Roman', Times, serif; font-size: 10pt;"><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; font-weight: bold; font-style: italic; text-align: justify; text-indent: 36pt;">Reclassifications</div><div><br /></div><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; text-align: justify; text-indent: 36pt;">Certain reclassifications have been made to the financial statements for prior periods to conform to the current period presentation.</div></div> 0 22000 1000 86000 2700000 3800000 500000 700000 4825000 400000 3614000 300000 222000 30000 <div style="font-family: 'Times New Roman', Times, serif; font-size: 10pt;"><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; font-weight: bold; font-style: italic; text-align: justify; text-indent: 36pt;">Accounts Receivable</div><div><br /></div><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; text-align: justify; text-indent: 36pt;">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 September 30, 2013 and December 31, 2012, receivables consisted primarily of amounts due from members and associates. 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. At each of September 30, 2013 and December 31, 2012, the Company held an allowance for doubtful accounts of less than $0.1 million.</div></div> 1157000 813000 5300000 6600000 1515000 1527000 5035000 3736000 -6920000 -6293000 <div style="font-family: 'Times New Roman', Times, serif; font-size: 10pt;"><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; font-weight: bold; font-style: italic; text-align: justify; text-indent: 36pt;">Revenue Recognition and Deferred Commissions</div><div><br /></div><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; text-align: justify; text-indent: 36pt;">The Company&#8217;s revenue is derived from sales of individual products, sales of its starter and renewal packs, and shipping fees. Substantially all of the Company&#8217;s product and pack sales are made to associates at published wholesale prices and to members at discounted published retail prices. The Company records revenue net of any sales taxes and records a reserve for expected sales returns based on its historical experience.</div><div><br /></div><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; text-align: justify; text-indent: 36pt;">The Company recognizes revenue from shipped packs and products upon receipt by the customer. Corporate-sponsored event revenue is recognized when the event is held. The Company defers certain components of its revenue. At each of September 30, 2013 and December 31, 2012, the Company&#8217;s deferred revenue was $5.3 million and $1.5 million, respectively. During the third quarter of 2013, the Company started a loyalty program where customers earn loyalty points from qualified automatic orders, which can be applied to future purchases. The Company defers the dollar equivalent in revenue of these points until the points are applied or forfeited. The deferred revenue associated with the loyalty program at September 30, 2013 was $2.5 million. Deferred revenue consisted primarily of: (i) sales of packs and products shipped but not received by the customers by the end of the respective period; (ii) revenue from the loyalty program and (iii) prepaid registration fees from customers planning to attend a future corporate-sponsored event. In total current assets, the Company defers commissions on (i) the sales of packs and products shipped but not received by the customers by the end of the respective period and (ii) the loyalty program. Deferred commissions were $2.2 million and $0.6 million at September 30, 2013 and December 30, 2012, respectively.</div><div><br /></div><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; text-align: justify; text-indent: 36pt;">We estimate a sales return reserve for expected sales refunds based on our historical experience over a rolling six-month period. 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padding-bottom: 2px; width: 1%; background-color: #cceeff;">&#160;</td><td valign="bottom" style="vertical-align: bottom; border-bottom: #000000 2px solid; text-align: left; width: 1%; background-color: #cceeff;">&#160;</td><td valign="bottom" style="vertical-align: bottom; border-bottom: #000000 2px solid; text-align: right; width: 9%; background-color: #cceeff;"><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif;">1.5</div></td><td nowrap="nowrap" valign="bottom" style="vertical-align: bottom; padding-bottom: 2px; text-align: left; width: 1%; background-color: #cceeff;">&#160;</td></tr><tr><td valign="bottom" style="vertical-align: top; padding-bottom: 4px; width: 76%; background-color: #ffffff;"><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; font-weight: bold; text-align: left; margin-left: 7.2pt; text-indent: -7.2pt;">Total</div></td><td valign="bottom" style="vertical-align: bottom; padding-bottom: 4px; width: 1%; background-color: #ffffff;">&#160;</td><td valign="bottom" style="vertical-align: bottom; border-bottom: #000000 4px double; text-align: left; width: 1%; background-color: #ffffff;"><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; font-weight: bold;">$</div></td><td valign="bottom" style="vertical-align: bottom; border-bottom: #000000 4px double; text-align: right; width: 9%; background-color: #ffffff;"><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; font-weight: bold;">14.7</div></td><td nowrap="nowrap" valign="bottom" style="vertical-align: bottom; padding-bottom: 4px; text-align: left; width: 1%; background-color: #ffffff;">&#160;</td><td valign="bottom" style="vertical-align: bottom; padding-bottom: 4px; width: 1%; background-color: #ffffff;">&#160;</td><td valign="bottom" style="vertical-align: bottom; border-bottom: #000000 4px double; text-align: left; width: 1%; background-color: #ffffff;"><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; font-weight: bold;">$</div></td><td valign="bottom" style="vertical-align: bottom; border-bottom: #000000 4px double; text-align: right; width: 9%; background-color: #ffffff;"><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; font-weight: bold;">15.2</div></td><td nowrap="nowrap" valign="bottom" style="vertical-align: bottom; padding-bottom: 4px; text-align: left; width: 1%; background-color: #ffffff;">&#160;</td></tr></table></div> <div style="font-family: 'Times New Roman', Times, serif; font-size: 10pt;"><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; font-weight: bold; font-style: italic; text-align: justify; text-indent: 36pt;">Other Assets</div><div><br /></div><div style="font-size: 10pt; font-family: ''Times New Roman'', Times, serif; text-align: justify; text-indent: 36pt;">As of September 30, 2013 and December 31, 2012, other assets were $2.9 million and $3.2 million, respectively, and primarily consisted of deposits for building leases in various locations of $1.5 million and $1.8 million, respectively. Additionally, included in the September 30, 2013 and December 31, 2012 balances was $1.0 million, representing a deposit with Mutual Aid Cooperative and Consumer in the Republic of Korea, an organization established by the Republic of Korea&#8217;s Fair Trade Commission to protect consumers who participate in network marketing activities. Also included in the September 30, 2013 and December 31, 2012 balances was $0.2 million of indefinite lived intangible assets relating to the Manapol &#174; powder trademark.</div></div> -2000 21000 -20000 119000 1.1 10000000 706000 6000 P36M 2008-2012 500000 400000 1900000 2147034680 1000000 1000000 2500000 84000 0 0 84000 0 0