Annual report pursuant to Section 13 and 15(d)

Industry, Segment and Geographic Financial Information

v3.19.1
Industry, Segment and Geographic Financial Information
 12 Months Ended
Dec. 31, 2018
Industry, Segment and Geographic Financial Information  
Industry, Segment and Geographic Financial Information

10.  Industry, Segment and Geographic Financial Information

 

The Company distributes software developed by others through resellers indirectly to customers worldwide.  We also resell computer software and hardware developed by others and provide technical services directly to customers in the USA and Canada. We also operate a sales branch in Europe to serve our customers in this region of the world.

 

Geographic revenue and identifiable assets related to operations as of and for the years ended December 31, 2018, 2017 and 2016 were as follows. Revenue is allocated to a geographic area based on the location of the sale, which is generally the customer’s country of domicile. No one country other than the USA represents more than 10% of net sales for 2018, 2017 or 2016.

 

 

 

 

 

 

 

 

 

 

 

 

 

    

2018

    

2017

    

2016

 

Net sales to Unaffiliated Customers:

 

 

              

 

 

              

 

 

              

 

USA

 

$

159,275

 

$

137,185

 

$

141,571

 

Canada

 

 

12,036

 

 

11,835

 

 

12,694

 

Rest of the world

 

 

10,133

 

 

11,547

 

 

10,344

 

Total

 

$

181,444

 

$

160,567

 

$

164,609

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

2018

    

2017

    

2016

 

Identifiable Assets by Geographic Areas at December 31,

 

 

               

 

 

               

 

 

               

 

USA and Rest of the world

 

$

100,681

 

$

97,481

 

$

108,568

 

Canada

 

 

7,290

 

 

7,209

 

 

7,684

 

Total

 

$

107,971

 

$

104,690

 

$

116,252

 

 

FASB ASC Topic 280, “Segment Reporting,” requires that public companies report profits and losses and certain other information on their “reportable operating segments” in their annual and interim financial statements. The internal organization used by the Company’s Chief Operating Decision Maker (CODM) to assess performance and allocate resources determines the basis for reportable operating segments. The Company’s CODM is the Chief Executive Officer.

 

The Company is organized into two reportable operating segments. The “Lifeboat Distribution” segment distributes technical software to corporate resellers, value added resellers (VARs), consultants and systems integrators worldwide. The “TechXtend” segment is a value-added reseller of software, hardware and services for corporations, government organizations and academic institutions in the USA and Canada.

 

As permitted by FASB ASC Topic 280, the Company has utilized the aggregation criteria in combining its operations in Canada with the domestic segments as they provide the same products and services to similar clients and are considered together when the CODM decides how to allocate resources.

 

Segment income is based on segment revenue less the respective segment’s cost of revenues as well as segment direct costs (including such items as payroll costs and payroll related costs, such as profit sharing, incentive awards and insurance) and excluding general and administrative expenses not attributed to a business unit. The Company only identifies accounts receivable and inventory by segment as shown below as “Selected Assets” by segment; it does not allocate its other assets, including capital expenditures by segment.

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31,

 

  

2018

  

2017

  

2016

Revenue:

 

 

 

 

 

 

 

 

 

Lifeboat Distribution

 

$

163,564

 

$

141,708

 

$

137,113

TechXtend

 

 

17,880

 

 

18,859

 

 

27,496

 

 

 

181,444

 

 

160,567

 

 

164,609

Gross Profit:

 

 

 

 

 

 

 

 

 

Lifeboat Distribution

 

$

23,441

 

$

23,183

 

$

22,349

TechXtend

 

 

3,479

 

 

3,893

 

 

4,982

 

 

 

26,920

 

 

27,076

 

 

27,331

Direct Costs:

 

 

 

 

 

 

 

 

 

Lifeboat Distribution

 

$

8,920

 

$

7,952

 

$

7,478

TechXtend

 

 

1,707

 

 

1,879

 

 

2,098

 

 

 

10,627

 

 

9,831

 

 

9,576

Segment Income Before Taxes: (1)

 

 

 

 

 

 

 

 

 

Lifeboat Distribution

 

$

14,521

 

$

15,231

 

$

14,871

TechXtend

 

 

1,772

 

 

2,014

 

 

2,884

Segment Income Before Taxes

 

 

16,293

 

 

17,245

 

 

17,755

 

 

 

 

 

 

 

 

 

 

General and administrative

 

$

9,692

 

$

9,432

 

$

9,139

Separation expenses

 

 

2,446

 

 

 —

 

 

 —

Interest, net

 

 

907

 

 

699

 

 

318

Foreign currency transaction gains (loss)

 

 

55

 

 

41

 

 

(1)

Income before taxes

 

$

5,117

 

$

8,553

 

$

8,933

 

(1) Excludes general corporate expenses including separation, interest, and foreign currency translation expenses.

 

The following table presents historical information by segment adjusted as if the standard had been adopted on January 1, 2016 for all periods presented.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31, 2017

 

Year ended December 31, 2016

 

 

As

 

Impact

 

As

 

As

 

Impact

 

As

 

 

Reported

 

of Adoption

 

 

Adjusted

 

 

Reported

 

of Adoption

 

 

Adjusted

Lifeboat Distribution Segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

       Net sales

 

$

417,427

 

$

(275,719)

 

$

141,708

 

 

$

369,519

 

$

(232,406)

 

$

137,113

        Cost of sales

 

 

394,244

 

 

(275,719)

 

 

118,525

 

 

 

347,170

 

 

(232,406)

 

 

114,764

        Gross profit

 

$

23,183

 

$

 —

 

$

23,183

 

 

$

22,349

 

$

 —

 

$

22,349

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TechXtend Segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

       Net sales

 

$

31,952

 

$

(13,093)

 

$

18,859

 

 

$

48,612

 

$

(21,116)

 

$

27,496

       Cost of sales

 

 

28,059

 

 

(13,093)

 

 

14,966

 

 

 

43,630

 

 

(21,116)

 

 

22,514

       Gross profit

 

$

3,893

 

$

 —

 

$

3,893

 

 

$

4,982

 

$

 —

 

$

4,982

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

 

 

 

 

December 31,

 

Selected Assets by Segment:

 

2018

 

2017

 

 

 

 

 

 

 

 

 

Lifeboat Distribution

 

$

77,610

 

$

73,794

 

TechXtend

 

 

11,542

 

 

21,451

 

Segment Select Assets

 

 

89,152

 

 

95,245

 

Corporate Assets

 

 

18,819

 

 

9,445

 

Total Assets

 

$

107,971

 

$

104,690

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Disaggregation of revenue:

 

Year ended December 31,

 

 

2018

    

2017

    

2016

Lifeboat Distribution

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hardware, software and other products

 

$
148,570

 

$
126,738

 

$
124,377

Software - security & highly interdependent with support

 

 
6,087

 

 
5,465

 

 
4,338

Maintenance, support & other services

 

 
8,907

 

 
9,505

 

 
8,398

Net Sales

 

$
163,564

 

$
141,708

 

$
137,113

 

 

 

 

 

 

 

 

 

 

TechXtend

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hardware, software and other products

 

$

16,300

 

$

17,182

 

$

24,572

Software - security & highly interdependent with support

 

 

440

 

 

474

 

 

578

Maintenance, support & other services

 

 

1,140

 

 

1,203

 

 

2,346

Net Sales

 

$
17,880

 

$
18,859

 

$
27,496

 

The Company had two customers that each accounted for more than 10% of total consolidated net sales for 2018. For the year ended December 31, 2018, CDW Corporation (“CDW”) and Software House International Corporation (“SHI”), accounted for 25.6%, and 16.6%, respectively, of consolidated net sales and as of December 31, 2018, 35.6% and 15.0%, respectively, of total net accounts receivable. For the year ended December 31, 2018, Sophos and SolarWinds accounted for 23.9% and 15.3%, respectively of our consolidated purchases.

 

For the year ended December 31, 2017, CDW and SHI accounted for 18.0%, and 20.1%, respectively, of consolidated net sales and as of December 31, 2017, 28.2%, and 14.9%, respectively, of total net accounts receivable. For the year ended December 31, 2017, Sophos and SolarWinds accounted for 26.4% and 14.7%, respectively of our consolidated purchases.

 

For the year ended December 31, 2016, CDW and SHI accounted for 17.3%, and 16.3%, respectively, of consolidated net sales. For the year ended December 31, 2016, Sophos and SolarWinds accounted for 23.1% and 10.8%, respectively of our consolidated purchases.

 

Our top five customers accounted for 55%,  50%, and 46% of consolidated net sales in 2018, 2017 and 2016, respectively.