Segment Information

9 Months Ended

Sep. 30, 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, Massachusetts, California and Tennessee. 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 10% and 12% of the Company’s total net sales for the three and nine months ended September 30, 2017 compared to 15% and 19% for the comparable periods 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 and nine months ended September 30, 2017 and 2016:

Financial data by segment:

(in thousands)

	Three months ended September 30,				Nine months ended    September 30,
Sales to external customers:	2017		2016		2017			2016
United States	$	30,038	$	28,489	$	88,653		$	87,311
Canada		1,661		1,585		5,556			5,623
Europe		2,086		1,839		6,171			5,264
Consolidated	$	33,785	$	31,913	$	100,380		$	98,198
Operating income (loss):
United States	$	1,709	$	1,974	$	6,084		$	7,165
Canada		209		148		744			558
Europe		31		18		202			12
Consolidated	$	1,949	$	2,140	$	7,030		$	7,735
Interest expense, net		365		247		949			642
Other (income) expense, net		16		65		(44	)		38
Consolidated income before income taxes	$	1,568	$	1,828	$	6,125		$	7,055

Assets by segment:
( in thousands )
	September 30,		December 31,
	2017		2016
United States	$	101,420	$	84,104
Canada		4,615		3,882
Europe		4,903		4,080
Consolidated	$	110,938	$	92,066