Segment Information

6 Months Ended

Jun. 30, 2020

Segment Information [Abstract]

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 and sharpening 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% and 11% of the Company’s total net sales for the three and six months ended June 30, 2020, respectively, compared to 19% and 14% for the comparable periods in 2019.

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 six months ended June 30, 2020 and 2019:

Financial data by segment:

(in thousands)

	Three months ended June 30,					Six months ended June 30,
Sales to external customers:	2020			2019		2020		2019
United States	$	38,476		$	34,958	$	68,922	$	62,423
Canada		2,381			2,216		4,800		3,628
Europe		3,185			3,046		6,095		5,539
Consolidated	$	44,042		$	40,220	$	79,817	$	71,590
Operating income:
United States	$	3,685		$	3,271	$	5,253	$	4,529
Canada		366			360		573		495
Europe		332			137		566		279
Consolidated	$	4,383		$	3,768	$	6,392	$	5,303
Interest expense, net		234			491		554		994
Other  (income) expense, net		(1	)		14		37		12
Consolidated income before income taxes	$	4,150		$	3,263	$	5,801	$	4,297

Assets by segment:

(in thousands)

	June 30,		December 31,
	2020		2019
United States	$	109,807	$	98,578
Canada		6,538		6,168
Europe		7,191		6,003
Consolidated	$	123,536	$	110,749