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 six-month periods ended June 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 reported 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 June 30,				Six Months Ended June 30,
(U.S. dollars in thousands)	2018		2017		2018		2017

Mainland China	$	245,256	$	172,098	$	442,787	$	322,102
Americas/Pacific		103,990		82,997		196,279		154,422
South Korea		91,624		86,917		180,554		169,388
Southeast Asia		79,223		60,545		150,083		123,570
Japan		64,113		64,796		127,337		125,952
Hong Kong/Taiwan		52,206		43,071		93,198		79,019
EMEA		44,010		38,188		88,991		72,252
Other		23,768		1,489		41,180		2,495
Total	$	704,190	$	550,101	$	1,320,409	$	1,049,200

Segment Contribution

	Three Months Ended June 30,						Six Months Ended June 30,
(U.S. dollars in thousands)	2018			2017			2018			2017

Mainland China	$	73,899		$	52,283		$	118,716		$	87,710
Americas/Pacific		17,068			12,718			26,240			23,777
South Korea		24,880			22,278			51,081			46,790
Southeast Asia		20,639			13,367			37,041			26,384
Japan		13,377			10,922			26,615			23,348
Hong Kong/Taiwan		7,835			7,766			15,681			12,849
EMEA		3,069			3,617			7,823			5,408
Total segment contribution		160,767			122,951			283,197			226,266
Corporate and other		(78,003	)		(58,212	)		(141,443	)		(115,265	)
Operating income		82,764			64,739			141,754			111,001
Other income (expense)		(11,165	)		(2,731	)		(9,958	)		(7,298	)
Income before provision for income taxes	$	71,599		$	62,008		$	131,796		$	103,703

Depreciation and Amortization

	Three Months Ended June 30,				Six Months Ended June 30,
(U.S. dollars in thousands)	2018		2017		2018		2017

Mainland China	$	3,444	$	3,681	$	6,931	$	7,652
Americas/Pacific		279		484		493		1,050
South Korea		1,576		1,654		3,243		3,286
Southeast Asia		564		550		1,123		1,077
Japan		900		899		1,815		1,779
Hong Kong/Taiwan		321		344		644		646
EMEA		175		322		351		594
Other		13,976		9,521		25,542		18,996
Total	$	21,235	$	17,455	$	40,142	$	35,080

Capital Expenditures

	Three Months Ended June 30,				Six Months Ended June 30,
(U.S. dollars in thousands)	2018		2017		2018		2017

Mainland China	$	1,029	$	760	$	2,898	$	1,663
Americas/Pacific		240		327		429		561
South Korea		44		16		44		464
Southeast Asia		144		333		195		533
Japan		72		21		383		97
Hong Kong/Taiwan		116		511		598		1,117
EMEA		42		118		77		311
Other		14,090		9,737		23,805		23,005
Total	$	15,777	$	11,823	$	28,429	$	27,751

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						Six Months Ended
	June 30,						June 30,
	2018			2017			2018			2017

Nu Skin		$	466,462		$	345,287		$	852,912		$	647,160
Pharmanex			212,998			202,912			425,897			399,015
Other			24,730			1,902			41,600			3,025
Totals		$	704,190		$	550,101		$	1,320,409		$	1,049,200

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, 2018 and December 31, 2017 (U.S. dollars in thousands):

	June 30, 2018		December 31, 2017

United States	$	357,043	$	302,884
Mainland China		89,529		97,046
South Korea		37,462		42,211
Japan		8,122		9,342
All others		11,296		13,104
Total	$	503,452	$	464,587