Segment Information

9 Months Ended

Sep. 30, 2019

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 first aid 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, Tennessee and California. 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. Individual direct import sales are made in larger quantities than domestic sales, typically full containers. Direct import sales represented approximately 14% of the Company’s total net sales for each of the three and nine month periods ended September 30, 2019, respectively, compared to 12% and 11% for the comparable periods in 2018.

The Chief Operating Decision Maker evaluates the performance of each operating segment based on segment revenues and operating income. Segment revenues are defined as total revenues, including both external customer revenue and inter-segment revenue. Segment operating earnings are defined as segment revenues, less cost of goods sold and operating expenses. Identifiable assets by segment are those assets used in the respective reportable segment’s operations. Inter-segment amounts are eliminated to arrive at consolidated financial results.

The following table sets forth certain financial data by segment for the three and nine months ended September 30, 2019 and 2018:

Financial data by segment:

(in thousands)

	Three months ended September 30,					Nine months ended    September 30,
Sales to external customers:	2019		2018			2019		2018
United States	$	32,780	$	30,913		$	95,178	$	93,468
Canada		1,775		1,691			5,402		5,715
Europe		2,440		2,127			8,005		7,008
Consolidated	$	36,995	$	34,731		$	108,585	$	106,191
Operating income:
United States	$	1,381	$	1,182		$	5,942	$	5,209
Canada		280		193			746		876
Europe		65		(2	)		341		278
Consolidated	$	1,726	$	1,373		$	7,029	$	6,363
Interest expense, net		469		496			1,463		1,346
Other expense, net		40		23			52		84
Consolidated income before income taxes	$	1,217	$	854		$	5,514	$	4,933

Assets by segment:
(in thousands)
	September 30,		December 31,
	2019		2018
United States	$	103,944	$	99,721
Canada		4,241		3,839
Europe		6,039		5,918
Consolidated	$	114,224	$	109,478