6.	SEGMENT INFORMATION

As a result of the Company’s management changes in the first quarter of 2017, the Company concluded that the Chief Operating Decision Maker, as defined in ASC 280, is now comprised of the CEO, President, and CFO. This change required the Company to reevaluate its determination of operating segments. The Company’s operating segments are based on geographic regions that generate revenue and hold its long-lived assets. The Company sells and distributes its products through a global network of customers and sales leaders in approximately 50 markets. The Company has divided these markets into seven operating segments, which are the Company’s reportable segments: Mainland China, Hong Kong/Taiwan, South Korea, Japan, Southeast Asia, Americas/Pacific and EMEA. The reportable segments generate revenue from the sale of personal care products and nutritional supplements under the Nu Skin and Pharmanex brands, have similar business characteristics and align with how the CODM function began assessing performance and allocating resources in the first quarter of 2017. The Other category includes the manufacturing and product-packaging companies that the Company acquired during the first quarter of 2018.

Segment information for the three- and nine-month periods ended September 30, 2017 has been recast to reflect the move of the Pacific components from the "Southeast Asia/Pacific" operating segment to the "Americas/Pacific" operating segment. 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 1 – The Company. 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 September 30,				Nine Months Ended September 30,
(U.S. dollars in thousands)	2018		2017		2018		2017

Mainland China	$	226,645	$	172,556	$	669,432	$	494,658
Americas/Pacific		93,580		85,672		289,859		240,094
South Korea		89,963		89,238		270,517		258,626
Southeast Asia		86,307		71,141		236,390		194,711
Japan		63,649		62,513		190,986		188,465
Hong Kong/Taiwan		44,949		41,050		138,147		120,069
EMEA		42,819		40,133		131,810		112,385
Other		27,400		1,395		68,580		3,890
Total	$	675,312	$	563,698	$	1,995,721	$	1,612,898

Segment Contribution

	Three Months Ended September 30,						Nine Months Ended September 30,
(U.S. dollars in thousands)	2018			2017			2018			2017

Mainland China	$	71,185		$	42,375		$	189,901		$	130,085
Americas/Pacific		11,848			14,106			38,088			37,884
South Korea		24,754			23,713			75,836			70,503
Southeast Asia		21,204			17,380			58,245			43,763
Japan		15,162			12,786			41,777			36,134
Hong Kong/Taiwan		8,100			8,096			23,781			20,945
EMEA		2,614			2,896			10,438			8,304
Total segment contribution		154,867			121,352			438,066			347,618
Corporate and other		(74,192	)		(56,990	)		(215,637	)		(172,255	)
Operating income		80,675			64,362			222,429			175,363
Other income (expense)		(6,982	)		(1,172	)		(16,940	)		(8,470	)
Income before provision for income taxes	$	73,693		$	63,190		$	205,489		$	166,893

Depreciation and Amortization

	Three Months Ended September 30,				Nine Months Ended September 30,
(U.S. dollars in thousands)	2018		2017		2018		2017

Mainland China	$	3,132	$	3,550	$	10,063	$	11,202
Americas/Pacific		229		375		722		1,425
South Korea		1,421		1,586		4,664		4,872
Southeast Asia		525		551		1,648		1,628
Japan		873		898		2,688		2,677
Hong Kong/Taiwan		279		353		923		999
EMEA		238		226		589		820
Other		15,994		9,906		41,536		28,902
Total	$	22,691	$	17,455	$	62,833	$	52,525

Capital Expenditures

	Three Months Ended September 30,				Nine Months Ended September 30,
(U.S. dollars in thousands)	2018		2017		2018		2017

Mainland China	$	2,117	$	688	$	5,015	$	2,351
Americas/Pacific		223		136		652		697
South Korea		135		—		179		464
Southeast Asia		357		281		552		814
Japan		125		109		508		206
Hong Kong/Taiwan		31		2		629		1,119
EMEA		348		571		425		882
Other		10,528		9,427		34,333		32,432
Total	$	13,864	$	11,214	$	42,293	$	38,965

Revenue by Major Market

A major market is defined as one with total revenue greater than 10% of consolidated total revenue. Based on this criteria, the Company has identified three major markets: Mainland China, South Korea and Japan. There are approximately 50 other markets, each of which individually is less than 10%. No single customer accounted for 10% or more of net sales for the periods presented. Sales are recorded in the jurisdiction in which the transactions occurred.

Revenue by Product Line

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017

Nu Skin	$	384,635	$	338,305	$	1,237,547	$	985,465
Pharmanex		261,892		224,031		687,789		623,046
Other		28,785		1,362		70,385		4,387
Totals	$	675,312	$	563,698	$	1,995,721	$	1,612,898

Long-Lived Assets by Major Market

A major market is defined as a market with long-lived assets greater than 10% of consolidated long-lived assets and also includes the Company’s country of domicile (the U.S.). Long-lived assets in Mainland China consist primarily of property, plant and equipment related to manufacturing, distribution facilities and the Mainland China headquarters. Long-lived assets in the U.S. consist primarily of property, plant and equipment, including the Company’s corporate offices and distribution facilities. Long-lived assets by major markets are set forth below for the periods ended September 30, 2018 and December 31, 2017 (U.S. dollars in thousands):

	September 30, 2018		December 31, 2017

United States	$	357,426	$	302,884
Mainland China		84,680		97,046
South Korea		36,609		42,211
Japan		7,195		9,342
All others		10,794		13,104
Total	$	496,704	$	464,587