Quarterly report pursuant to Section 13 or 15(d)

Business Segments

Business Segments

6 Months Ended

Mar. 31, 2018

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 DTG2Go business units. We market, distribute and manufacture unembellished knit apparel under the main brands of Delta Platinum™, Delta Dri®, Delta Magnum Weight®, and Delta Pro 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 proprietary technology, DTG2Go embellishes garments to create private label, custom-decorated apparel servicing the fast-growing e-retailer channels as well as the ad-specialty, promotional products and retail marketplaces.

The branded segment is comprised of our business units focused on specialized apparel garments, headwear, and related accessories to meet consumer preferences and fashion trends, and includes our Salt Life, Soffe, and Coast business units. Our branded segment also included our Junkfood business unit prior to its disposition on March 31, 2017. These branded products are sold through specialty and boutique shops, traditional department stores and 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.

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 September 30, 2017, 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				Six Months Ended
	March 31, 2018		April 1, 2017		March 31, 2018		April 1, 2017
Segment net sales:
Basics	$	73,712	$	70,811	$	146,889	$	131,647
Branded	26,292		33,327		43,457		57,826
Total net sales	$	100,004	$	104,138	$	190,346	$	189,473

Segment operating income:
Basics	$	6,209	$	7,560	$	10,401	$	12,248
Branded	2,554		2,780		3,010		1,776
Total segment operating income	$	8,763	$	10,340	$	13,411	$	14,024

The following table reconciles the segment operating income to the consolidated income before provision for income taxes (in thousands):



	Three Months Ended				Six Months Ended
	March 31, 2018		April 1, 2017		March 31, 2018		April 1, 2017
Segment operating income	$	8,763	$	10,340	$	13,411	$	14,024
Unallocated corporate expenses	3,149		2,820		6,059		6,033
Unallocated interest expense	1,350		1,312		2,685		2,613
Consolidated income before provision for income taxes	$	4,264	$	6,208	$	4,667	$	5,378

Basic segment assets increased by approximately $27.0 million since September 30, 2017, to $218.6 million as of March 31, 2018, principally as a result of the digital print acquisition. See Note D—Acquisitions for further information. In addition, receivables increased from September 30, 2017 due to the seasonality of the business. Branded segment assets have increased by $4.8 million since September 30, 2017, to $122.2 million as of March 31, 2018 due to higher receivables.