Segment Reporting

In the fourth quarter of 2016, the Company concluded that it has two operating segments, which are also reportable segments, and were organized based on products and services. The Company’s reportable segments are:


•	Mobile connectivity, and


•	Inertial navigation

The Company’s Chief Operating Decision Maker (CODM), whom the Company has identified as its Chief Executive Officer, primarily evaluates the business and assesses performance based on the revenue and operating income of the segments. The Company does not allocate interest, taxes, and certain corporate-level costs to its reportable segments, as discussed further below.

The financial results of each segment are based on revenues from external customers, cost of revenue and operating expenses that are directly attributable to the segment and an allocation of costs from shared functions. These shared functions include, but are not limited to, facilities, human resources, information technology, and engineering. Allocations are made based on management’s judgment of the most relevant factors, such as head count, number of customer sites, or other operational data that contributes to the shared costs. Certain corporate-level costs have not been allocated as they are not attributable to either segment. These costs primarily consist of broad corporate functions, including executive, legal, finance, and costs associated with corporate actions. Segment-level asset information has not been provided as such information is not reviewed by the CODM for purposes of assessing segment performance and allocating resources. There are no inter-segment sales or transactions.

The Company's performance is impacted by the levels of activity in the marine and land mobile markets and defense sectors, among others. Performance in any particular period could be impacted by the timing of sales to certain large customers.

The mobile connectivity segment primarily manufactures and distributes a comprehensive family of mobile satellite antenna products and services that provide access to television, the Internet and voice services while on the move. Product sales within the mobile connectivity segment accounted for approximately 20%, 23% and 23% of our consolidated net sales for 2017, 2016 and 2015, respectively. Sales of mini-VSAT Broadband airtime service accounted for approximately 41%, 37%, and 35% of our consolidated net sales for 2017, 2016, 2015, respectively. Sales of content and training sales within the mobile connectivity segment accounted for approximately 20%, 20% and 21% of our consolidated net sales for 2017, 2016 and 2015, respectively.

The inertial navigation segment manufactures and distributes a portfolio of digital compass and fiber optic gyro (FOG)-based systems that address the rigorous requirements of military and commercial customers and provide reliable, easy-to-use and continuously available navigation and pointing data. The principal product categories in this segment include the FOG based inertial measurement units (IMUs) for precision guidance, FOGs for tactical navigation as well as pointing and stabilization systems, and digital compasses that provide accurate heading information for demanding applications, security, automation and access control equipment and systems. Sales of FOG-based guidance and navigation systems within the inertial navigation segment accounted for approximately 13%, 10%, and 10% of consolidated net sales for 2017, 2016, and 2015, respectively.

No other single product class accounts for 10% or more of consolidated net sales.

The Company operates in a number of major geographic areas, including internationally. Revenues from international locations, primarily consisting of Canada, European countries, both inside and outside the European Union, as well as Africa, Asia/Pacific, the Middle East, and India. Revenues are based upon customer location and internationally represented 62%, 63%, and 67% of consolidated net sales for 2017, 2016 and 2015, respectively. No individual foreign country represented 10% or more of the Company's consolidated net sales for 2017. Sales to Canada represented 11% and 10% of net sales for 2016 and 2015, respectively. No other individual foreign country represented 10% or more of the Company’s consolidated net sales for 2016 or 2015.

As of December 31, 2017 and 2016, the long-lived tangible assets related to the Company’s international subsidiaries were less than 10% of the Company’s long-lived tangible assets and were deemed not material.

Net sales and operating (loss) earnings for the Company's reporting segments and the Company's (loss) income before income tax expense for the years ended December 31, 2017, 2016, and 2015 were as follows:



	For the year ended December 31,
	2017			2016			2015
Net sales:
Mobile connectivity	$	132,227		$	141,507		$	147,809
Inertial navigation	27,861			34,615			36,825
Consolidated net sales	$	160,088		$	176,122		$	184,634

Operating earnings (loss):
Mobile connectivity	$	7,334		$	10,041		$	9,459
Inertial navigation	556			5,272			7,934
Subtotal	7,890			15,313			17,393
Unallocated, net	(16,654		)	(16,635		)	(14,185		)
Consolidated (loss) operating earnings	(8,764		)	(1,322		)	3,208
Net interest and other expense	(1,174		)	(648		)	(542		)
(Loss) income before income tax expense	$	(9,938	)	$	(1,970	)	$	2,666

Depreciation expense and amortization expense for the Company's segments are presented in the table that follows for the periods presented:



	For the year ended December 31,
	2017		2016		2015
Depreciation expense:
Mobile connectivity	$	5,720	$	6,084	$	5,843
Inertial navigation	928		1,063		961
Unallocated	77		461		389
Total consolidated depreciation expense	$	6,725	$	7,608	$	7,193

Amortization expense:
Mobile connectivity	$	4,312	$	4,956	$	5,526
Inertial navigation	—		—		—
Unallocated	—		—		—
Total consolidated amortization expense	$	4,312	$	4,956	$	5,526