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. As discussed in Note 1, the Company’s Videotel business, which had previously been included in the mobile connectivity segment, has been classified as discontinued operations and therefore excluded from the segment information below.

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 21% and 21% of the Company's consolidated net sales for the three months ended June 30, 2019 and 2018, respectively, and 20% and 22% of the Company's consolidated net sales for the six months ended June 30, 2019 and 2018, respectively. Sales of mini-VSAT Broadband airtime service accounted for 49% and 45% of the Company's consolidated net sales for the three months ended June 30, 2019 and 2018, respectively, and 50% and 46% of the Company's consolidated net sales for the six months ended June 30, 2019 and 2018, 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 17% and 17% of the Company's consolidated net sales for the three months ended June 30, 2019 and 2018, respectively, and 15% and 16% of the Company's consolidated net sales for the six months ended June 30, 2019 and 2018, 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 61% and 55% of the Company's consolidated net sales for the three months ended June 30, 2019 and 2018, respectively, and 60% and 54% of the Company's consolidated net sales for the six months ended June 30, 2019 and 2018, respectively. No individual foreign country represented 10% or more of the Company's consolidated net sales for the three or six months ended June 30, 2019 and 2018.

As of June 30, 2019 and December 31, 2018, 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, 2019 and 2018 were as follows:



	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Net sales:
Mobile connectivity	$	30,974		$	29,004		$	59,547		$	57,057
Inertial navigation	8,261			9,628			15,723			16,980
Consolidated net sales	$	39,235		$	38,632		$	75,270		$	74,037

Operating income (loss):
Mobile connectivity	$	(2,519	)	$	(243	)	$	(3,876	)	$	176
Inertial navigation	(247		)	1,564			195			1,898
Subtotal	(2,766		)	1,321			(3,681		)	2,074
Unallocated, net	(4,067		)	(3,901		)	(9,300		)	(8,486		)
Loss from operations	(6,833		)	(2,580		)	(12,981		)	(6,412		)
Net interest and other income (expense)	780			263			474			(306		)
Loss before income tax expense	$	(6,053	)	$	(2,317	)	$	(12,507	)	$	(6,718	)

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,
	2019		2018		2019		2018
Depreciation expense:
Mobile connectivity	$	1,669	$	1,346	$	3,339	$	2,481
Inertial navigation	307		254		594		506
Unallocated	138		128		274		269
Total consolidated depreciation expense	$	2,114	$	1,728	$	4,207	$	3,256

Amortization expense:
Mobile connectivity	$	247	$	257	$	495	$	518
Inertial navigation	—		—		—		—
Unallocated	—		—		—		—
Total consolidated amortization expense	$	247	$	257	$	495	$	518