Note 19. Segment Information

In accordance with ASC 280, Segment Reporting, the Company has three reportable segments: Smokeless products, Smoking products, and NewGen products. The Smokeless products segment (i) manufactures and markets moist snuff and (ii) contracts for and markets chewing tobacco products. The Smoking products segment (i) markets and distributes cigarette papers, tubes, and related products; (ii) markets and distributes finished cigars and MYO cigar wraps; and (iii) processes, packages, markets, and distributes traditional pipe tobaccos. The NewGen products segment (i) markets and distributes e-cigarettes, e-liquids, vaporizers, and certain other products without tobacco and/or nicotine; (ii) markets and distributes a wide assortment of vaping and CBD related products to non-traditional retail outlets via VaporBeast, Vapor Shark, Vapor Supply, IVG and Solace; and (iii) markets and distributes a wide assortment of vaping and CBD related products to individual consumers via Vapor Shark and VaporFi branded retail outlets in addition to online platforms. Smokeless and Smoking products are distributed primarily through wholesale distributors in the United States while NewGen products are distributed primarily through e-commerce to non-traditional retail outlets and direct to consumers in the United States. The Other segment includes the costs and assets of the Company not assigned to one of the three reportable segments such as intercompany transfers, deferred taxes, deferred financing fees, and investments in subsidiaries.

The accounting policies of these segments are the same as those of the Company. Corporate costs are not directly charged to the three reportable segments in the ordinary course of operations. The Company evaluates the performance of its segments and allocates resources to them based on operating income. In 2018, corporate costs were allocated to the segments based on net sales. Management believes this allocation does not reflect the operations of the business. Prior periods have been adjusted to conform to the current year presentation.

The tables below present financial information about reported segments:

	Three Months Ended September 30,
	2019			2018

Net sales
Smokeless products	$	26,187		$	21,743
Smoking products		30,222			28,079
NewGen products		40,391			33,527
	$	96,800		$	83,349

Gross profit
Smokeless products	$	13,587		$	11,020
Smoking products		16,619			14,814
NewGen products		12,610			10,377
	$	42,816		$	36,211

Operating income (loss)
Smokeless products	$	9,392		$	5,861
Smoking products		12,931			10,861
NewGen products		(1,233	)		2,539
Corporate unallocated ⁽¹⁾		(8,058	)		(6,303	)
	$	13,032		$	12,958

Interest expense, net		3,641			3,702
Investment income		(265	)		(89	)
Loss on extinguishment of debt		1,158			-
Net periodic benefit income, excluding service cost		(12	)		(45	)

Income before income taxes	$	8,510		$	9,390

Capital expenditures
Smokeless products		1,208		$	251
Smoking products		-			-
NewGen products		888			274
	$	2,096		$	525

Depreciation and amortization
Smokeless products	$	415		$	342
Smoking products		-			-
NewGen products		633			343
	$	1,048		$	685

(1) Includes corporate costs that are not allocated to any of the three reportable segments.

	Nine Months ended September 30,
	2019			2018

Net sales
Smokeless products	$	74,907		$	66,900
Smoking products		81,104			84,403
NewGen products		125,756			87,089
	$	281,767		$	238,392

Gross profit
Smokeless products	$	39,723		$	34,546
Smoking products		43,841			43,158
NewGen products		40,899			26,111
	$	124,463		$	103,815

Operating income (loss)
Smokeless products	$	26,610		$	21,049
Smoking products		33,251			31,855
NewGen products		9,056			5,511
Corporate unallocated ⁽¹⁾		(23,909	)		(20,914	)
	$	45,008		$	37,501

Interest expense, net		11,233			10,811
Investment income		(527	)		(328	)
Loss on extinguishment of debt		1,308			2,384
Net periodic benefit expense, excluding service cost		(34	)		176

Income before income taxes	$	33,028		$	24,458

Capital expenditures
Smokeless products	$	2,310		$	1,140
Smoking products		-			-
NewGen products		1,750			388
	$	4,060		$	1,528

Depreciation and amortization
Smokeless products	$	1,137		$	1,014
Smoking products		-			-
NewGen products		1,797			1,139
	$	2,934		$	2,153

(1) Includes corporate costs that are not allocated to any of the three reportable segments.

	September 30, 2019		December 31, 2018
Assets
Smokeless products	$	111,541	$	99,441
Smoking products		140,940		142,520
NewGen products		116,484		95,397
Corporate unallocated ⁽¹⁾		85,290		2,019
	$	454,255	$	339,377

(1) Includes assets not assigned to the three reportable segments. All goodwill has been allocated to the reportable segments.

Revenue Disaggregation—Sales Channel

Revenues of the Smokeless and Smoking segments are primarily comprised of sales made to wholesalers while NewGen sales are made business to business and business to consumer, both online and through our corporate retail stores. NewGen net sales are broken out by sales channel below.

	NewGen Segment
	Three Months Ended, September 30,
	2019		2018

Business to Business	$	29,981	$	26,603
Business to Consumer - Online		8,367		4,361
Business to Consumer - Corporate store		2,017		2,550
Other		26		13
	$	40,391	$	33,527

	NewGen Segment
	Nine Months Ended, September 30,
	2019		2018

Business to Business	$	93,182	$	72,948
Business to Consumer - Online		25,052		8,095
Business to Consumer - Corporate store		7,381		5,943
Other		141		103
	$	125,756	$	87,089

Net Sales—Domestic vs. Foreign

The following table shows a breakdown of consolidated net sales between domestic and foreign customers.

	Three Months Ended September 30,
	2019		2018
Domestic	$	91,236	$	78,529
Foreign		5,564		4,820
Total	$	96,800	$	83,349

	Nine Months Ended September 30,
	2019		2018
Domestic	$	271,521	$	226,826
Foreign		10,246		11,566
Total	$	281,767	$	238,392