Annual report pursuant to Section 13 and 15(d)

Business Segments

Business Segments

12 Months Ended

Sep. 29, 2018

BUSINESS SEGMENTS

During fiscal year 2018, we made a strategic decision to re-align our business into segments that better reflect our operating model and allow us to better leverage and more efficiently manage our cost structure as we plan future growth. With this realignment, we changed and renamed our reportable segments to reflect how our Chief Operating Decision maker and management currently make financial decisions and allocate resources. We are now reporting our results under the Delta Group, comprising our Delta Activewear, DTG2Go and Soffe business units, and the Salt Life Group, comprising our Salt Life and Coast business units. Junkfood was included in the Salt Life Group segment until its divestiture in March, 2017. We have recast the segment information for the fiscal year ended September 30, 2017, to conform to the current presentation.

The Delta Group is comprised of our business units primarily focused on core activewear styles, and includes our Delta Activewear (which includes Delta Catalog and FunTees), Soffe, and DTG2Go business units. We market, distribute and manufacture unembellished knit apparel under the main brands of Soffe®, Delta Platinum, 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, 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 Salt Life Group is comprised of our lifestyle brands focused on a broad range of apparel garments, headwear and related accessories to meet consumer preferences and fashion trends, and includes our Salt Life and Coast business units. These products are sold through specialty and boutique shops, traditional department stores, and outdoor retailers, as well as direct-to-consumer through branded ecommerce sites and branded retail stores. Products in this segment are marketed under our lifestyle brands of Salt Life® and COAST®, as well as other labels. Junkfood was included in this segment until its divestiture in March, 2017.

Our Chief Operating Decision Maker and management evaluate performance and allocate resources based on profit or loss from operations before interest, income taxes and special charges ("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. Intercompany transfers between operating segments are transacted at cost and have been eliminated within the segment amounts shown in the following table (in thousands).



	Fiscal Year Ended
	September 29, 2018		September 30, 2017
Segment net sales:
Delta Group	$	356,009	$	326,575
Salt Life Group	39,441		58,507
Total net sales	395,450		385,082

Segment operating income:
Delta Group	26,091		23,251
Salt Life Group	4,747		4,880
Total segment operating income	30,838		28,131

Purchases of property, plant and equipment:
Delta Group	4,341		5,619
Salt Life Group	917		1,281
Corporate	511		185
Total purchases of property, plant and equipment	5,769		7,085

Depreciation and amortization:
Delta Group	8,090		7,632
Salt Life Group	1,456		1,568
Corporate	442		409
Total depreciation and amortization	9,988		9,609

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



	Fiscal Year Ended
	September 29, 2018		September 30, 2017
Segment operating income	$	30,838	$	28,131
Loss attributable to non-controlling interest	107		—
Unallocated corporate expenses	13,328		11,952
Unallocated interest expense	5,713		5,011
Consolidated income before provision for income taxes	$	11,690	$	11,168

Our revenues include sales to domestic and foreign customers. Foreign customers are composed of companies whose headquarters are located outside of the United States. Supplemental information regarding our revenues by geographic area based on the location of the customer is as follows (in thousands):



	Fiscal Year Ended
	September 29, 2018		September 30, 2017
United States	$	394,252	$	383,672
Foreign	1,198		1,410
Total net sales	$	395,450	$	385,082

Our total assets and equity investment by segment are as follows (in thousands):



	As of
	September 29, 2018	September 30, 2017
Total assets by segment:
Delta Group	283,811	247,910
Salt Life Group	55,032	61,108
Corporate	4,766	8,784
Total assets	343,609	317,802

Equity investment in joint venture:
Delta Group	8,980	4,140
Salt Life Group	—	—
Total equity investment in joint venture	8,980	4,140

Our long-lived assets, excluding goodwill and intangible assets, consist of property, plant and equipment for all locations. We attribute our property, plant and equipment to a particular country based on the location of the long-lived assets. Summarized financial information by geographic area is as follows (in thousands):



	As of
	September 29, 2018		September 30, 2017

United States	$	30,768	$	19,587

Honduras	16,823		18,151
El Salvador	3,476		3,853
Mexico	1,047		1,115
All foreign countries	21,346		23,119

Total long-lived assets, excluding goodwill and intangibles	$	52,114	$	42,706