Segment Information

6 Months Ended

Jun. 30, 2018

Segment Information

Segment Information

6. 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 18% and 13% of the Company’s total net sales for the three and six months ended June 30, 2018 compared to 17% and 13% for the comparable periods in 2017.

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 six months ended June 30, 2018 and 2017:

Financial data by segment:

(in thousands)

	Three months ended June 30,					Six months ended    June 30,
Sales to external customers:		2018	2017			2018		2017
United States	$	34,778	$	34,140		$	62,555	$	58,615
Canada		2,472		2,503			4,024		3,895
Europe		2,501		2,206			4,881		4,085
Consolidated	$	39,751	$	38,849		$	71,460	$	66,595
Operating income (loss):
United States	$	2,912	$	3,289		$	4,028	$	4,419
Canada		543		503			682		535
Europe		170		119			280		171
Consolidated	$	3,625	$	3,911		$	4,990	$	5,125
Interest expense, net		445		321			850		583
Other expense (income), net		74		(29	)		61		(16	)
Consolidated income before income taxes	$	3,106	$	3,619		$	4,079	$	4,558

Assets by segment:
(in thousands)
	June 30,		December 31,
	2018		2017
United States	$	107,841	$	104,431
Canada		4,758		4,926
Europe		5,979		5,373
Consolidated	$	118,578	$	114,730