Quarterly report pursuant to Section 13 or 15(d)

Note J - Business Segments

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Note J - Business Segments
9 Months Ended
Jun. 29, 2019
Notes to Financial Statements  
Segment Reporting Disclosure [Text Block]
Note J—Business Segments
 
We operate our business in
two
segments, the Delta Group and the Salt Life Group. 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 re-alignment, 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 report 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. 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 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 including sporting goods retailers, large licensed screen printers, specialty and resort stores, ad-specialty and promotional products businesses, the U.S. military and others. 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, screen print, traditional retail, social media, and licensed apparel marketplaces, among others.
 
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
®
.
 
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 income"). Our segment operating income 
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 29, 2018
, 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
 
Nine Months Ended
   
June 29, 2019
 
June 30, 2018
 
June 29, 2019
 
June 30, 2018
Segment net sales:
 
 
 
 
 
 
 
 
 
 
 
 
Delta Group
  $
107,409
  $
102,107
  $
291,325
  $
272,157
Salt Life Group
   
11,851
   
10,075
   
32,448
   
30,371
Total net sales
  $
119,260
  $
112,182
  $
323,773
  $
302,528
                         
Segment operating income:
 
 
 
 
 
 
 
 
 
 
 
 
Delta Group
(1)
  $
9,248
  $
9,137
  $
15,393
  $
19,337
Salt Life Group
(2)
   
2,596
   
1,085
   
5,608
   
4,295
Total segment operating income
  $
11,844
  $
10,222
  $
21,001
  $
23,632
 
(
1
)
In the quarter ended
December 29, 2018,
the Delta Group operating income included
$2.5
million of expense incurred in connection with the settlement of litigation related to the
2016
bankruptcy filing of The Sports Authority. See Note M - Legal Proceedings.
(
2
)
In the quarter ended
June 29, 2019,
the Salt Life Group operating income included a discrete gain of
$1.3
 million realized from the settlement of a commercial litigation matter. 
 
The following table reconciles the segment operating income to the consolidated income before provision for income taxes (in thousands):
 
   
Three Months Ended
   
Nine Months Ended
 
   
June 29, 2019
   
June 30, 2018
   
June 29, 2019
   
June 30, 2018
 
Segment operating income
  $
11,844
    $
10,222
    $
21,001
    $
23,632
 
Unallocated corporate expenses
   
3,508
     
3,554
     
9,930
     
9,613
 
Unallocated interest expense
   
1,989
     
1,522
     
5,739
     
4,207
 
Consolidated income (loss) before provision for income taxes
  $
6,347
    $
5,146
    $
5,332
    $
9,812
 
 
The Delta Group segment assets have increased by
$32.7
million since
September 29, 2018
, to
$316.6
million as of
June 29, 2019
, as a result of our recent digital print acquisition as well as increases in working capital due to the seasonality of the business. See Note D—Acquisitions for further information on our recent digital print acquisition.  The Salt Life Group segment assets have increased by
$6.1
million since
September 29, 2018
, to
$61.1
million as of
June 29, 2019
, primarily due to higher receivables.