Segment Reporting

The financial results of each segment are based on revenues from external customers, cost of revenue and operating expenses that are directly attributable to the segment and an allocation of costs from shared functions. These shared functions include, but are not limited to, facilities, human resources, information technology, and engineering. Allocations are made based on management’s judgment of the most relevant factors, such as head count, number of customer sites, or other operational data that contribute to the shared costs. Certain corporate-level costs have not been allocated as they are not directly attributable to either segment. These costs primarily consist of broad corporate functions, including executive, legal, finance, and costs associated with corporate actions. Segment-level asset information has not been provided as such information is not reviewed by the chief operating decision-maker for purposes of assessing segment performance and allocating resources. There are no inter-segment sales or transactions.

The Company's performance is impacted by the levels of activity in the marine and land mobile markets and defense sectors, among others. Performance in any particular period could be impacted by the timing of sales to certain large customers.

The mobile connectivity segment primarily manufactures and distributes a comprehensive family of mobile satellite antenna products and services that provide access to television, the Internet and voice services while on the move. Product sales within the mobile connectivity segment accounted for 19% and 22% of the Company's consolidated net sales for the three months ended June 30, 2018 and 2017, respectively, and 19% and 23% of the Company's consolidated net sales for the six months ended June 30, 2018 and 2017, respectively. Sales of mini-VSAT Broadband airtime service accounted for 40% and 41% of the Company's consolidated net sales for the three months ended June 30, 2018 and 2017, respectively, and 40% and 40% of the Company's consolidated net sales for the six months ended June 30, 2018 and 2017, respectively. Sales of content and training services within the mobile connectivity segment accounted for 18% and 20% of the Company's consolidated net sales for the three months ended June 30, 2018 and 2017, respectively, and 18% and 20% of the Company's consolidated net sales for the six months ended June 30, 2018 and 2017, respectively.

The inertial navigation segment manufactures and distributes a portfolio of digital compass and fiber optic gyro (FOG)-based systems that address the rigorous requirements of military and commercial customers and provide reliable, easy-to-use and continuously available navigation and pointing data. The principal product categories in this segment include the FOG-based inertial measurement units (IMUs) for precision guidance, FOGs for tactical navigation as well as pointing and stabilization systems, and digital compasses that provide accurate heading information for demanding applications, security, automation and access control equipment and systems. Sales of FOG-based guidance and navigation systems within the inertial navigation segment accounted for 15% and 12% of the Company's consolidated net sales for the three months ended June 30, 2018 and 2017, respectively, and 14% and 11% of the Company's consolidated net sales for the six months ended June 30, 2018 and 2017, respectively.

No other single product class accounts for 10% or more of the Company's consolidated net sales.

The Company operates in a number of major geographic areas across the globe. The Company generates international net sales, based upon customer location, primarily from customers located in Canada, Europe, Africa, Asia/Pacific, the Middle East, and India. International revenues represented 60% and 62% of the Company's consolidated net sales for the three months ended June 30, 2018 and 2017, respectively, and 59% and 61% of the Company's consolidated net sales for the six months ended June 30, 2018 and 2017, respectively. No individual foreign country represented 10% or more of the Company's consolidated net sales for the three months ended June 30, 2018 and 2017. No individual foreign country represented 10% or more of the Company's consolidated net sales for the six months ended June 30, 2018 or 2017.

As of June 30, 2018 and December 31, 2017, the long-lived tangible assets related to the Company’s international subsidiaries were less than 10% of the Company’s long-lived tangible assets and were deemed not material.

Net sales and operating income (loss) for the Company's reporting segments and the Company's loss before income tax expense for the three and six months ended June 30, 2018 and 2017 were as follows:



	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2018			2017			2018			2017
Net sales:
Mobile connectivity	$	33,764		$	34,034		$	66,513		$	68,321
Inertial navigation	9,628			6,415			16,980			12,339
Consolidated net sales	$	43,392		$	40,449		$	83,493		$	80,660

Operating income (loss):
Mobile connectivity	$	1,149		$	2,638		$	2,221		$	3,260
Inertial navigation	1,564			362			1,898			318
Subtotal	2,713			3,000			4,119			3,578
Unallocated, net	(3,900		)	(4,368		)	(8,486		)	(9,416		)
Loss from operations	(1,187		)	(1,368		)	(4,367		)	(5,838		)
Net interest and other income (expense)	173			(302		)	(362		)	(557		)
Loss before income tax expense	$	(1,014	)	$	(1,670	)	(4,729		)	$	(6,395	)

Depreciation expense and amortization expense for the Company's segments are presented in the following table for the periods presented:



	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
Depreciation expense:
Mobile connectivity	$	1,810	$	1,394	$	3,370	$	2,872
Inertial navigation	254		199		506		395
Unallocated	128		21		269		40
Total consolidated depreciation expense	$	2,192	$	1,614	$	4,145	$	3,307

Amortization expense:
Mobile connectivity	$	1,046	$	1,102	$	2,143	$	2,170
Inertial navigation	—		—		—		—
Unallocated	—		—		—		—
Total consolidated amortization expense	$	1,046	$	1,102	$	2,143	$	2,170