Segment Information

9 Months Ended

Sep. 30, 2016

Segment Information

Segment Information

Note 5— Segment Information

The Company reports financial information based on the organizational structure used by the Company’s chief operating decision makers for making operating and investment decisions and for assessing performance. The Company’s reportable business segments consist of: (1) United States; (2) Canada and (3) Europe. As described below, the activities of the Company’s Asian operations are closely linked to those of the U.S. operations; accordingly, the Company’s chief operating decision makers review the financial results of both on a consolidated basis, and the results of the Asian operations have been aggregated with the results of the United States operations to form one reportable segment called the “United States segment” or “U.S. segment”. Each reportable segment derives its revenue from the sales of cutting devices, measuring instruments and safety products for school, office, home, hardware, sporting and industrial use.

Domestic sales orders are filled primarily from the Company’s distribution center in North Carolina. The Company is responsible for the costs of shipping, insurance, customs clearance, duties, storage and distribution related to such products. Orders filled from the Company’s inventory are generally for less than container-sized lots.

Direct import sales are products sold by the Company’s Asian subsidiary, directly to major U.S. retailers, who take ownership of the products in Asia. These sales are completed by delivering product to the customers’ common carriers at the shipping points in Asia. Direct import sales are made in larger quantities than domestic sales, typically full containers. Direct import sales represented approximately 15% and 19% of the Company’s total net sales for the three and nine months ended September 30, 2016 compared to 15% and 18% for the comparable periods in 2015.

The chief operating decision maker evaluates the performance of each operating segment based on segment revenues and operating income. Segment amounts are presented after converting to U.S. dollars and consolidating eliminations.

Financial data by segment:

(in thousands)

	Three months ended September 30,				Nine months ended September 30,
Sales to external customers:	2016		2015		2016		2015
United States	$	28,489	$	26,160	$	87,311	$	75,943
Canada		1,585		1,669		5,623		5,726
Europe		1,839		2,074		5,264		5,025
Consolidated	$	31,913	$	29,903	$	98,198	$	86,694
Operating income (loss):
United States	$	1,974	$	1,849	$	7,165	$	6,405
Canada		148		30		558		202
Europe		18		112		12		86
Consolidated	$	2,140	$	1,991	$	7,735	$	6,693
Interest expense, net		247		149		642		420
Other expense, net		65		92		38		149
Consolidated income before income taxes	$	1,829	$	1,750	$	7,055	$	6,124

Assets by segment:
( in thousands )
	September 30,		December 31,
	2016		2015
United States	$	90,518	$	73,688
Canada		4,559		3,709
Europe		4,295		4,024
Consolidated	$	99,372	$	81,421