Segment Information

6 Months Ended

Jun. 30, 2019

10.	Segment Information

The Company reports revenue from nine segments, consisting of its seven geographic Nu Skin segments—Mainland China, South Korea, Southeast Asia, Americas/Pacific, Japan, Hong Kong/Taiwan, and EMEA—and its Manufacturing and Grow Tech segments, which the Company decided to disclose separately beginning in the first quarter of 2019. Previously, these latter two segments were included in the Other category. The Other category includes miscellaneous corporate revenue and related adjustments. These segments reflect the way the chief operating decision maker evaluates the Company’s business performance and allocates resources. Reported revenue includes only the revenue generated by sales to external customers.

Segment information for the three- and six-month periods ended June 30, 2018 has been recast to reflect the separate disclosure of the Manufacturing and Grow Tech segments, both of which were previously included in the Other category. Consolidated financial information is not affected.

Profitability by segment as determined under US GAAP is driven primarily by the Company’s transfer pricing policies. Segment contribution, which is the Company’s segment profitability metric presented in the table below, excludes certain intercompany charges, specifically royalties, license fees, transfer pricing, discrete charges and other miscellaneous items. These charges have been included in Corporate and other expenses. Corporate and other expenses also include costs related to the Company’s executive and administrative offices, information technology, research and development, and marketing and supply chain functions not recorded at the segment level.

The accounting policies of the segments are the same as those described in Note 2 – Summary of Significant Accounting Policies. The Company evaluates the performance of its segments based on revenue and segment contribution. Each segment records direct expenses related to its employees and its operations.

Summarized financial information for the Company’s reportable segments is shown in the following tables. Asset information is not reviewed or included with the Company’s internal management reporting. Therefore, the Company has not disclosed asset information for each reportable segment.

Revenue by Segment

	Three Months Ended June 30,				Six Months Ended June 30,
(U.S. dollars in thousands)	2019		2018		2019			2018

Nu Skin
Mainland China	$	185,333	$	245,256	$	393,821		$	442,787
Americas/Pacific		92,841		103,990		179,297			196,279
South Korea		84,732		91,624		168,585			180,554
Southeast Asia		75,395		79,223		147,890			150,083
Japan		65,251		64,113		127,360			127,337
Hong Kong/Taiwan		43,712		52,206		84,270			93,198
EMEA		43,400		44,010		85,218			88,991
Other		1,249		1,030		(177	)		1,265
Total Nu Skin		591,913		681,452		1,186,264			1,280,494
Manufacturing ⁽¹⁾		31,557		22,738		60,829			39,915
Grow Tech		30		—		30			—
Total	$	623,500	$	704,190	$	1,247,123		$	1,320,409

(1)

The Manufacturing segment had $6.5 million and $6.6 million of intersegment revenue for the three-month period ended June 30, 2019 and 2018, respectively, and $12.4 million and $9.8 million. for the first half of 2019 and 2018, respectively. Intersegment revenue is eliminated in the consolidated financial statements, as well as the reported segment revenue in the table above.

Segment Contribution

	Three Months Ended June 30,						Six Months Ended June 30,
(U.S. dollars in thousands)	2019			2018			2019			2018

Nu Skin
Mainland China	$	51,087		$	73,899		$	110,254		$	118,716
Americas/Pacific		16,420			17,068			28,439			26,240
South Korea		25,979			24,880			51,647			51,081
Southeast Asia		20,840			20,639			38,832			37,041
Japan		15,823			13,377			29,929			26,615
Hong Kong/Taiwan		9,217			7,835			16,691			15,681
EMEA		3,234			3,069			4,585			7,823
Nu Skin contribution		142,600			160,767			280,377			283,197
Manufacturing		3,375			2,348			7,021			1,994
Grow Tech		(4,582	)		(2,057	)		(8,211	)		(3,317	)
Total segment contribution		141,393			161,058			279,187			281,874
Corporate and other		(67,191	)		(78,294	)		(136,332	)		(140,120	)
Operating income		74,202			82,764			142,855			141,754
Other income (expense)		(3,326	)		(11,165	)		(6,174	)		(9,958	)
Income before provision for income taxes	$	70,876		$	71,599		$	136,681		$	131,796

Depreciation and Amortization

	Three Months Ended June 30,				Six Months Ended June 30,
(U.S. dollars in thousands)	2019		2018		2019		2018

Nu Skin
Mainland China	$	2,909	$	3,444	$	6,025	$	6,931
Americas/Pacific		206		279		420		493
South Korea		1,358		1,576		2,882		3,243
Southeast Asia		462		564		939		1,123
Japan		957		900		2,005		1,815
Hong Kong/Taiwan		537		321		1,053		644
EMEA		272		175		712		351
Total Nu Skin		6,701		7,259		14,036		14,600
Manufacturing		1,631		2,821		3,205		5,646
Grow Tech		945		228		1,820		446
Corporate and other		9,775		10,927		19,598		19,450
Total	$	19,052	$	21,235	$	38,659	$	40,142

Capital Expenditures

	Three Months Ended June 30,				Six Months Ended June 30,
(U.S. dollars in thousands)	2019		2018		2019		2018

Nu Skin
Mainland China	$	1,033	$	1,029	$	2,714	$	2,898
Americas/Pacific		473		240		747		429
South Korea		30		44		79		44
Southeast Asia		225		144		319		195
Japan		946		72		1,118		383
Hong Kong/Taiwan		1,091		116		1,554		598
EMEA		42		42		76		77
Total Nu Skin		3,840		1,687		6,607		4,624
Manufacturing		1,579		719		3,181		1,468
Grow Tech		2,066		5,735		5,051		8,322
Corporate and other		7,964		7,636		14,375		14,015
Total	$	15,449	$	15,777	$	29,214	$	28,429