Quarterly report pursuant to Section 13 or 15(d)

Note K - Business Segments

v3.20.1
Note K - Business Segments
 6 Months Ended
Mar. 28, 2020
Notes to Financial Statements  
Segment Reporting Disclosure [Text Block]
Note K—Business Segments
 
Our operations are managed and reported in
two
segments, Delta Group and Salt Life Group, which reflect the manner in which the business is managed and results are reviewed by the Chief Executive Officer, who is our chief operating decision maker. 
 
The Delta Group is comprised of our business units primarily focused on core activewear styles, and includes our Delta Activewear (encompassing our Delta Catalog and FunTees businesses), 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. Through our FunTees business, we serve our customers as their supply chain partner, from product development to shipment of their branded products, with the majority of products sold with value-added services including embellishment, hangers, hangtags and ticketing, so that they are ready for retail sale to the end customers. We assist our customers in managing their production and inventory needs and provide technology tools to help them manage and grow their business. We sell our products to a diversified audience, including sporting goods retailers, large licensed screen printers, specialty and resort stores, and ad-specialty and promotional products businesses. We also service major branded sportswear companies, trendy regional brands, retailers, and sports-licensed apparel marketers. Our
DTG2Go
business is a market leader in the direct-to-garment digital print and fulfillment industry, bringing technology and innovation to the supply chain of our many customers. We use highly-automated factory processes and our proprietary software to deliver on-demand, digitally printed apparel direct to consumers on behalf of our customers. Utilizing its
seven
fulfillment facilities throughout the United States,
DTG2Go
offers a robust digital supply chain to ship custom graphic products typically within
24
to
48
hours to consumers in the United States and to over
100
countries worldwide.
 
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.
 
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 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 28, 2019,
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 28, 2020
  
March 30, 2019
  
March 28, 2020
  
March 30, 2019
Segment net sales:
      
 
      
 
      
 
      
 
Delta Group
   $
84,191
   $
89,526
   $
173,143
   $
183,916
Salt Life Group
  
12,469
  
13,312
  
19,407
  
20,597
Total net sales
   $
96,660
   $
102,838
   $
192,550
   $
204,513
                                 
Segment operating income:
      
 
      
 
      
 
      
 
Delta Group
(1)
   $
5,066
   $
3,367
   $
12,334
   $
6,144
Salt Life Group
  
1,473
  
2,733
  
804
  
3,012
Total segment operating income
   $
6,539
   $
6,100
   $
13,138
   $
9,156
 
(
1
)
In the quarter ended
March 28, 2020,
the Delta Group operating income included
$1.9
million of cost of goods sold expense from plant curtailments caused by government mandated country closures in El Salvador and Honduras in
March 2020.
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 a customer.
 
The following table reconciles the segment operating income to the consolidated earnings (loss) before provision for income taxes (in thousands):
 
   
Three Months Ended
  
Six Months Ended
   
March 28, 2020
  
March 30, 2019
  
March 28, 2020
  
March 30, 2019
Segment operating income
   $
6,539
   $
6,100
   $
13,138
   $
9,156
Unallocated corporate expenses
  
2,985
  
3,405
  
6,947
  
6,422
Unallocated interest expense
  
1,808
  
1,985
  
3,610
  
3,750
Consolidated earnings (loss) before provision for income taxes
   $
1,746
   $
710
   $
2,581
   $
(1,016
 )
 
The Delta Group segment assets have increased by
$48.0
million since
September 28, 2019,
to
$363.7
million as of
March 28, 2020
, primarily as a result of the adoption of ASU
2016
-
02
and increases in working capital due to the seasonality of the business. The Salt Life Group segment assets have increased by
$13.4
million since
September 28, 2019
, to
$71.0
million as of
March 28, 2020
, primarily due to seasonal inventory build and the adoption of ASU
2016
-
02.
The working capital of both segments increased as well due to the impact of slower sales and collections in late
March 2020
due to the COVID-
19
pandemic.