Quarterly report pursuant to Section 13 or 15(d)

Business Segments

v3.7.0.1
Business Segments
 9 Months Ended
Jul. 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 printing equipment and 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 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, as well as direct-to-consumer through branded ecommerce sites and "brick and mortar" retail stores. 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 its acquisition on August 30, 2016.
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
 
July 1, 2017
 
July 2, 2016
Segment net sales:
 
 
 
Basics
$
79,009

 
$
72,097

Branded
25,272

 
39,455

Total net sales
104,281

 
111,552

 
 
 
 
Segment operating income:
 
 
 
Basics
7,497

 
5,193

Branded
2,146

 
2,661

Total segment operating income
9,643

 
7,854

 
Nine Months Ended
 
July 1, 2017
 
July 2, 2016
Segment net sales:
 
 
 
Basics
$
210,657

 
$
203,453

Branded
83,098

 
107,430

Total net sales
293,755

 
310,883

 
 
 
 
Segment operating income:
 
 
 
Basics
19,745

 
17,653

Branded
3,923

 
4,481

Total segment operating income
23,668

 
22,134

The following reconciles the segment operating income to the consolidated income before provision for income taxes (in thousands):
 
Three Months Ended
 
Nine Months Ended
 
July 1, 2017
 
July 2, 2016
 
July 1, 2017
 
July 2, 2016
Segment operating income
$
9,643

 
$
7,854

 
$
23,668

 
$
22,134

Unallocated corporate expenses
3,792

 
3,627

 
9,825

 
9,748

Unallocated interest expense
1,256

 
1,338

 
3,868

 
4,009

Consolidated income before provision for income taxes
$
4,595

 
$
2,889

 
$
9,975

 
$
8,377



As a result of the sale of the Junkfood business (see Note D—Sale of Junkfood), branded segment assets have declined by approximately $31.7 million from October 1, 2016, to $124.5 million as of July 1, 2017. Basics segment assets have increased by $17.6 million since October 1, 2016, to $195.9 million as of July 1, 2017, due principally to higher inventory levels for replenishment orders and higher receivables resulting from the spring selling season.