Quarterly report pursuant to Section 13 or 15(d)

Business Segments

v3.7.0.1
Business Segments
 6 Months Ended
Apr. 01, 2017
Segment Reporting [Abstract]  
Business Segments
Business Segments
We operate our business in two distinct segments: branded and basics. Although the two segments are similar in their production processes and regulatory environments, they are distinct in their economic characteristics, products, marketing, and distribution methods.
The basics segment is comprised of our business units primarily focused on garment styles characterized by low fashion risk, and includes our Delta Activewear (which includes Delta Catalog and FunTees) and Art Gun business units. We market, distribute and manufacture unembellished knit apparel under the main brands of Delta Pro Weight® and Delta Magnum Weight® for sale to a diversified audience ranging from large licensed screen printers to small independent businesses. We also manufacture private label products for major branded sportswear companies, trendy regional brands, retailers, and sports licensed apparel marketers. Typically our private label products are sold with value-added services such as hangtags, ticketing, hangers, and embellishment so that they are fully ready for retail. Using digital print equipment and its proprietary technology, Art Gun embellishes garments to create private label, custom decorated apparel servicing the fast-growing e-retailer channels.
The branded segment is comprised of our business units which are focused on specialized apparel garments and headwear to meet consumer preferences and fashion trends, and includes our Salt Life, Soffe, and Coast business units, as well as Junkfood until its divestiture on March 31, 2017. These branded embellished and unembellished products are sold through specialty and boutique shops, upscale and traditional department stores, mid-tier retailers, sporting goods stores, e-retailers and the U.S. military. Products in this segment are marketed under our lifestyle brands of Salt Life®, Soffe®, and COAST®, as well as other labels. The results of the Coast business have been included in the branded segment since acquisition on August 30, 2016, and the results of the Junkfood business were included in the branded segment until its divestiture on March 31, 2017.
Our Chief Operating Decision Maker and management evaluate performance and allocate resources based on profit or loss from operations before interest and income taxes ("segment operating earnings"). Our segment operating earnings may not be comparable to similarly titled measures used by other companies. The accounting policies of our reportable segments are the same as those described in Note 2 in our Annual Report on Form 10-K for the fiscal year ended October 1, 2016, filed with the SEC. Intercompany transfers between operating segments are transacted at cost and have been eliminated within the segment amounts shown in the following table (in thousands).
 
Three Months Ended
 
April 1, 2017
 
April 2, 2016
Segment net sales:
 
 
 
Basics
$
70,811

 
$
69,840

Branded
33,327

 
39,320

Total net sales
104,138

 
109,160

 
 
 
 
Segment operating income:
 
 
 
Basics
7,560

 
6,691

Branded
2,780

 
2,569

Total segment operating income
10,340

 
9,260

 
Six Months Ended
 
April 1, 2017
 
April 2, 2016
Segment net sales:
 
 
 
Basics
$
131,647

 
$
131,355

Branded
57,826

 
67,976

Total net sales
189,473

 
199,331

 
 
 
 
Segment operating income:
 
 
 
Basics
12,248

 
12,460

Branded
1,776

 
1,816

Total segment operating income
14,024

 
14,276

The following reconciles the segment operating income to the consolidated income before provision for income taxes (in thousands):
 
Three Months Ended
 
Six Months Ended
 
April 1, 2017
 
April 2, 2016
 
April 1, 2017
 
April 2, 2016
Segment operating income
$
10,340

 
$
9,260

 
$
14,024

 
$
14,276

Unallocated corporate expenses
2,820

 
3,329

 
6,033

 
6,120

Unallocated interest expense
1,312

 
1,396

 
2,613

 
2,671

Consolidated income before provision for income taxes
$
6,208

 
$
4,535

 
$
5,378

 
$
5,485



As a result of the sale of the Junkfood business, see Note D—Sale of Junkfood, branded segment assets have declined by approximately $19.6 million from October 1, 2016, to $136.6 million as of April 1, 2017. Basics segment assets have increased by $14.1 million since October 1, 2016, to $192.5 million as of April 1, 2017, due principally to having higher inventory levels to better service our customers during the spring selling season.