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SEGMENT INFORMATION | 6 Months Ended
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Jun. 30, 2017
SEGMENT INFORMATION [Abstract] |
SEGMENT INFORMATION |
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, South Asia/Pacific, Americas and EMEA. The seven 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. Profitability by segment as reported under US 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
|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
(U.S. dollars in thousands) |  | 2017 |  |  | 2016 |  |  | 2017 |  |  | 2016 |
Mainland China |  | $ | 172,098 |  |  | $ | 184,344 |  |  | $ | 322,102 |  |  | $ | 302,999 |
South Korea |  |  | 86,917 |  |  |  | 93,036 |  |  |  | 169,388 |  |  |  | 179,154 |
Americas |  |  | 77,096 |  |  |  | 67,884 |  |  |  | 142,754 |  |  |  | 133,632 |
South Asia/Pacific |  |  | 67,935 |  |  |  | 92,297 |  |  |  | 137,733 |  |  |  | 155,875 |
Japan |  |  | 64,796 |  |  |  | 72,849 |  |  |  | 125,952 |  |  |  | 137,940 |
Hong Kong/Taiwan |  |  | 43,071 |  |  |  | 52,372 |  |  |  | 79,019 |  |  |  | 92,428 |
EMEA |  |  | 38,188 |  |  |  | 37,693 |  |  |  | 72,252 |  |  |  | 70,278 |
Total |  | $ | 550,101 |  |  | $ | 600,475 |  |  | $ | 1,049,200 |  |  | $ | 1,072,306 |
Segment Contribution
|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
(U.S. dollars in thousands) |  | 2017 |  |  | 2016 |  |  | 2017 |  |  | 2016 |
Mainland China |  | $ | 52,283 |  |  | $ | 56,709 |  |  | $ | 87,710 |  |  | $ | 75,010 |
South Korea |  |  | 22,278 |  |  |  | 24,195 |  |  |  | 46,790 |  |  |  | 48,252 |
Americas |  |  | 11,646 |  |  |  | 12,177 |  |  |  | 21,742 |  |  |  | 22,649 |
South Asia/Pacific |  |  | 14,439 |  |  |  | 24,348 |  |  |  | 28,419 |  |  |  | 36,801 |
Japan |  |  | 10,922 |  |  |  | 15,933 |  |  |  | 23,348 |  |  |  | 27,980 |
Hong Kong/Taiwan |  |  | 7,766 |  |  |  | 7,070 |  |  |  | 12,849 |  |  |  | 15,428 |
EMEA |  |  | 3,617 |  |  |  | 2,833 |  |  |  | 5,408 |  |  |  | 3,180 |
Total segment contribution |  |  | 122,951 |  |  |  | 143,265 |  |  |  | 226,266 |  |  |  | 229,300 |
Corporate and other |  |  | (58,212 | ) |  |  | (63,467 | ) |  |  | (115,265 | ) |  |  | (141,353 | )
Operating income |  |  | 64,739 |  |  |  | 79,798 |  |  |  | 111,001 |  |  |  | 87,947 |
Other income (expense) |  |  | (2,731 | ) |  |  | (11,060 | ) |  |  | (7,298 | ) |  |  | (13,923 | )
Income before provision for income taxes |  | $ | 62,008 |  |  | $ | 68,738 |  |  | $ | 103,703 |  |  | $ | 74,024 |
Depreciation and Amortization
|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
(U.S. dollars in thousands) |  | 2017 |  |  | 2016 |  |  | 2017 |  |  | 2016 |
Mainland China |  | $ | 3,681 |  |  | $ | 4,117 |  |  | $ | 7,652 |  |  | $ | 8,144 |
South Korea |  |  | 1,654 |  |  |  | 1,723 |  |  |  | 3,286 |  |  |  | 3,364 |
Americas |  |  | 448 |  |  |  | 679 |  |  |  | 978 |  |  |  | 1,338 |
South Asia/Pacific |  |  | 585 |  |  |  | 597 |  |  |  | 1,148 |  |  |  | 1,160 |
Japan |  |  | 899 |  |  |  | 953 |  |  |  | 1,779 |  |  |  | 1,846 |
Hong Kong/Taiwan |  |  | 344 |  |  |  | 547 |  |  |  | 646 |  |  |  | 1,111 |
EMEA |  |  | 322 |  |  |  | 367 |  |  |  | 594 |  |  |  | 671 |
Corporate and other |  |  | 9,522 |  |  |  | 8,756 |  |  |  | 18,997 |  |  |  | 17,050 |
Total |  | $ | 17,455 |  |  | $ | 17,739 |  |  | $ | 35,080 |  |  | $ | 34,684 |
Capital Expenditures
|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
(U.S. dollars in thousands) |  | 2017 |  |  | 2016 |  |  | 2017 |  |  | 2016 |
Mainland China |  | $ | 760 |  |  | $ | 2,098 |  |  | $ | 1,663 |  |  | $ | 6,998 |
South Korea |  |  | 16 |  |  |  | 109 |  |  |  | 464 |  |  |  | 379 |
Americas |  |  | 313 |  |  |  | 211 |  |  |  | 564 |  |  |  | 489 |
South Asia/Pacific |  |  | 347 |  |  |  | 1,466 |  |  |  | 530 |  |  |  | 1,743 |
Japan |  |  | 21 |  |  |  | 128 |  |  |  | 97 |  |  |  | 867 |
Hong Kong/Taiwan |  |  | 511 |  |  |  | 37 |  |  |  | 1,117 |  |  |  | 265 |
EMEA |  |  | 118 |  |  |  | 202 |  |  |  | 311 |  |  |  | 667 |
Corporate and other |  |  | 9,737 |  |  |  | 9,521 |  |  |  | 23,005 |  |  |  | 13,306 |
Total |  | $ | 11,823 |  |  | $ | 13,772 |  |  | $ | 27,751 |  |  | $ | 24,714 |
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 June 30, |  |  | Six Months Ended June 30, |
|  | 2017 |  |  | 2016 |  |  | 2017 |  |  | 2016 |
Nu Skin |  | $ | 345,287 |  |  | $ | 365,266 |  |  | $ | 647,160 |  |  | $ | 655,255 |
Pharmanex |  |  | 202,912 |  |  |  | 234,014 |  |  |  | 399,015 |  |  |  | 414,728 |
Other |  |  | 1,902 |  |  |  | 1,195 |  |  |  | 3,025 |  |  |  | 2,323 |
Totals |  | $ | 550,101 |  |  | $ | 600,475 |  |  | $ | 1,049,200 |  |  | $ | 1,072,306 |
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 June 30, 2017 and December 31, 2016 (U.S. dollars in thousands):
|  | June 30, 2017 |  |  | December 31, 2016 |
United States |  | $ | 291,906 |  |  | $ | 283,868 |
Mainland China |  |  | 93,855 |  |  |  | 97,867 |
South Korea |  |  | 41,748 |  |  |  | 41,545 |
Japan |  |  | 10,261 |  |  |  | 11,517 |
All others |  |  | 12,937 |  |  |  | 9,935 |
Total |  | $ | 450,707 |  |  | $ | 444,732 |

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- Definition The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 34 -URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e8981-108599 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 41 -URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e9038-108599 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 33 -URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e8971-108599 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 12 -URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e8595-108599 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e8380-108599 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 32 -URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e8933-108599 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 26 -URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e8844-108599 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 35 -URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e8984-108599 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 40 -URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e9031-108599 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 42 -URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e9054-108599 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e8538-108599 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 29 -URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e8864-108599 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 31 -URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e8924-108599 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 30 -URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e8906-108599 + Details
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