Segment Reporting

6 Months Ended

Jun. 30, 2020

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 18% and 22% of the Company's consolidated net sales for the three months ended June 30, 2020 and 2019, respectively, and 18% and 21% of the Company's consolidated net sales for the six months ended June 30, 2020 and 2019, respectively. Sales of mini-VSAT Broadband airtime service accounted for 55% and 48% of the Company's consolidated net sales for the three months ended June 30, 2020 and 2019, respectively, and 54% and 49% of the Company's consolidated net sales for the six months ended June 30, 2020 and 2019, 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 16% of the Company's consolidated net sales for each of the three months ended June 30, 2020 and 2019, and 15% of the Company's consolidated net sales for each of the six months ended June 30, 2020 and 2019.

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 57% and 51% of the Company's consolidated net sales for the three months ended June 30, 2020 and 2019, respectively, and 58% and 55% of the Company's consolidated net sales for the six months ended June 30, 2020 and 2019, respectively. No individual foreign country represented 10% or more of the Company's consolidated net sales for the three months ended June 30, 2020 or 2019. Sales to Singapore customers represented 10% of the Company's consolidated net sales for the six months ended June 30, 2020. No other individual foreign country represented 10% or more of the Company's consolidated net sales for the six months ended June 30, 2020. No individual foreign country represented 10% or more of the Company's consolidated net sales for the six months ended June 30, 2019.

As of June 30, 2020 and December 31, 2019, 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 (benefit) for the three and six months ended June 30, 2020 and 2019 were as follows:


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020		2019		2020		2019
Net sales:
Mobile connectivity	$	29,186	$	31,469	$	58,082	$	60,383
Inertial navigation	7,740		8,261		15,412		15,723
Consolidated net sales	$	36,926	$	39,730	$	73,494	$	76,106

Operating income (loss):
Mobile connectivity	$	584	$	(2,365)	$	(1,715)	$	(3,808)
Inertial navigation	154		(247)		(667)		195
Subtotal	738		(2,612)		(2,382)		(3,613)
Unallocated, net	(4,174)		(4,067)		(8,702)		(9,300)
Loss from operations	(3,436)		(6,679)		(11,084)		(12,913)
Net interest and other income	53		781		1,864		474
Loss from continuing operations before income tax expense (benefit)	$	(3,383)	$	(5,898)	$	(9,220)	$	(12,439)

Depreciation expense and amortization expense for the Company's reporting segments for the three and six months ended June 30, 2020 and 2019 were as follows:


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020		2019		2020		2019
Depreciation expense:
Mobile connectivity	$	2,041	$	1,669	$	3,999	$	3,339
Inertial navigation	323		307		616		594
Unallocated	147		138		298		274
Total consolidated depreciation expense	$	2,511	$	2,114	$	4,913	$	4,207

Amortization expense:
Mobile connectivity	$	241	$	247	$	489	$	495
Inertial navigation	—		—		—		—
Unallocated	—		—		—		—
Total consolidated amortization expense	$	241	$	247	$	489	$	495