Segment Information

12 Months Ended

Dec. 31, 2019

18. 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 (“CODM”) evaluates the Company’s business performance and allocates resources. Reported revenue for these segments includes only the revenue generated by sales to external customers. The seven geographic Nu Skin segments generate revenue from the sale of personal care products and wellness products under the Nu Skin, Pharmanex and ageLOC brands, all of which have similar business characteristics and align with how the CODM function assesses performance and allocates resources.

Segment information for 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 reported under U.S. GAAP is driven primarily by the Company’s international taxation 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, 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

	Year Ended December 31,
(U.S. dollars in thousands)	2019		2018		2017
Nu Skin
Mainland China	$	722,526	$	886,472	$	716,991
Americas/Pacific		349,078		385,034		342,429
South Korea		329,978		373,357		361,692
Southeast Asia		301,620		316,890		268,631
Japan		260,039		254,939		256,085
EMEA		167,165		182,394		160,275
Hong Kong/Taiwan		166,335		185,893		166,696
Other		1,621		3,423		6,300
Total Nu Skin		2,298,362		2,588,402		2,279,099
Manufacturing ⁽¹⁾		121,917		90,606		—
Grow Tech		137		—		—
Total	$	2,420,416	$	2,679,008	$	2,279,099

(1)	The Manufacturing segment had $25.7 million, $23.5 million and zero of intersegment revenue for the years ended December 31, 2019, 2018 and 2017, respectively. Intersegment revenue is eliminated in the consolidated financial statements, as well as the reported segment revenue in the table above.

Segment Contribution

	Year Ended December 31,
(U.S. dollars in thousands)	2019			2018			2017
Nu Skin
Mainland China	$	191,570		$	253,598		$	211,625
Americas/Pacific		57,090			52,433			51,885
South Korea		99,892			107,215			100,964
Southeast Asia		82,455			78,598			63,296
Japan		61,081			56,676			51,372
EMEA		10,195			14,773			11,749
Hong Kong/Taiwan		33,569			33,392			27,958
Nu Skin contribution		535,852			596,685			518,849
Manufacturing		15,693			7,754			—
Grow Tech		(19,509	)		(9,228	)		—
Total segment contribution		532,036			595,211			518,849
Corporate and other		(264,610	)		(354,351	)		(244,366	)
Operating income		267,426			240,860			274,483
Other income (expense)		(12,254	)		(21,194	)		(8,916	)
Income before provision for income taxes	$	255,172		$	219,666		$	265,567

Depreciation and Amortization

	Year Ended December 31,
(U.S. dollars in thousands)	2019		2018		2017
Nu Skin
Mainland China	$	10,496	$	13,036	$	15,122
Americas/Pacific		864		988		1,746
South Korea		5,093		6,266		6,499
Southeast Asia		1,915		2,123		2,234
Japan		3,866		3,604		3,554
EMEA		1,260		847		985
Hong Kong/Taiwan		2,310		1,316		1,395
Total Nu Skin		25,804		28,180		31,535
Manufacturing		6,689		11,281		—
Grow Tech		4,008		1,885		—
Corporate and other		40,149		41,657		40,029
Total	$	76,650	$	83,003	$	71,564

Capital Expenditures

	Year Ended December 31,
(U.S. dollars in thousands)	2019		2018		2017
Nu Skin
Mainland China	$	14,814	$	11,658	$	4,539
Americas/Pacific		1,340		974		800
South Korea		1,223		285		469
Southeast Asia		759		1,120		1,753
Japan		1,528		788		994
EMEA		364		734		1,168
Hong Kong/Taiwan		3,203		4,113		1,350
Total Nu Skin		23,231		19,672		11,073
Manufacturing		6,595		5,486		—
Grow Tech		6,938		14,591		—
Corporate and other		29,303		30,622		49,083
Total	$	66,067	$	70,371	$	60,156

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 four major markets: Mainland China, South Korea, Japan and the United States, the country of domicile. There are approximately 45 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:

	Year Ended December 31,
(U.S. dollars in thousands)	2019		2018		2017
Mainland China	$	722,526	$	886,472	$	716,991
South Korea		329,978		373,357		361,692
Japan		260,039		254,939		256,085
United States		324,727		311,436		218,734
All others		783,146		852,804		725,597
Total	$	2,420,416	$	2,679,008	$	2,279,099

Revenue by Product Line

	Year Ended December 31,
(U.S. dollars in thousands)	2019		2018		2017
Personal Care	$	1,423,485	$	1,659,737	$	1,456,386
Wellness		863,125		921,328		817,230
Other		133,806		97,943		5,483
Total	$	2,420,416	$	2,679,008	$	2,279,099

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 United States). Long-lived assets in Mainland China consist primarily of property, plant and equipment and related to manufacturing, distribution facilities and the Mainland China headquarters. Long-lived assets in the United States consist primarily of property, plant and equipment, including the Company’s corporate offices and distribution facilities. As a result of adoption of ASC 842, long-lived assets for 2019 include our ROU assets. Long-lived assets by major market are set forth below for the periods ended December 31, 2019, 2018 and 2017:

	Year Ended December 31,
(U.S. dollars in thousands)	2019		2018		2017
United States	$	354,410	$	317,516	$	302,884
Mainland China		136,845		89,447		97,046
South Korea		35,286		36,325		42,211
Japan		12,015		6,864		9,342
All others		59,374		14,383		13,104
Total	$	597,930	$	464,535	$	464,587