Segment Information

3 Months Ended

Mar. 31, 2017

Segment Information

Segment Information

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 centers in North Carolina, Washington and Massachusetts. 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 7% of the Company’s total net sales for the three months ended March 31, 2017 compared to 13% for the comparable period in 2016.

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.

The following table sets forth certain financial data by segment for the three months ended March 31, 2017 and 2016:

Financial data by segment:

(in thousands)

	Three months ended March 31,
Sales to external customers:	2017			2016
United States	$	24,475		$	22,526
Canada		1,391			1,389
Europe		1,879			1,373
Consolidated	$	27,745		$	25,288
Operating income (loss):
United States	$	1,108		$	945
Canada		32			32
Europe		52			(22	)
Consolidated	$	1,192		$	955
Interest expense, net		263			184
Other income, net		(9	)		(38	)
Consolidated income before income taxes	$	938		$	809

Assets by segment:
		March 31		December 31
		2017		2016
United States	$	91,891	$	84,104
Canada		3,903		3,882
Europe		4,410		4,080
Consolidated	$	100,204	$	92,066