Quarterly report pursuant to Section 13 or 15(d)

Business Segments

v3.5.0.2
Business Segments
 9 Months Ended
Jul. 02, 2016
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. In the second quarter of 2016, in connection with the ongoing evaluation of our current and future strategic initiatives, the Chief Operating Decision Maker began reviewing the performance of the branded and basics segments excluding general corporate expenses. Therefore, we report our financial performance on the two reportable segments, branded and basics, with corporate activities stated separately. Our financial statements reflect this reporting with prior periods adjusted accordingly.
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 the Salt Life, Junkfood, and Soffe business units, as well as The Game business unit prior to its disposition on March 2, 2015. 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. Products in this segment are marketed under our lifestyle brands of Salt Life®, Junk Food®, and Soffe®, as well as other labels.
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 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, retailers, corporate industry programs, e-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, Art Gun embellishes garments to create private label, custom decorated apparel servicing the fast-growing e-retailer channels.
Robert W. Humphreys, 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 (loss)”). Our segment operating earnings (loss) may not be comparable to similarly titled measures used by other companies. Intercompany transfers between operating segments are transacted at cost and have been eliminated within the segment amounts shown in the following table.
Information about our operations as of and for the three months ended July 2, 2016, and June 27, 2015, by operating segment, is as follows (in thousands):
 
Basics
 
Branded
 
Corporate
 
Consolidated
Three months ended July 2, 2016
 
 
 
 
 
 
 
Net sales
$
72,097

 
$
39,455

 
$
—

 
$
111,552

Segment operating income (loss) *
5,431

 
2,661

 
(3,865
)
 
4,227

Segment assets
177,063

 
157,734

 
10,693

 
345,490

 
 
 
 
 
 
 
 
Three months ended June 27, 2015
 
 
 
 
 
 
 
Net sales
$
79,035

 
$
41,490

 
$
—

 
$
120,525

Segment operating income (loss)
6,673

 
3,103

 
(2,879
)
 
6,897

Segment assets
164,737

 
153,319

 
10,972

 
329,028


 
Basics
 
Branded
 
Corporate
 
Consolidated
Nine months ended July 2, 2016
 
 
 
 
 
 
 
Net sales
$
203,453

 
$
107,430

 
$
—

 
$
310,883

Segment operating income (loss) *
18,410

 
4,478

 
(10,502
)
 
12,386

 
 
 
 
 
 
 
 
Nine months ended June 27, 2015
 
 
 
 
 
 
 
Net sales
$
208,103

 
$
120,844

 
$
—

 
$
328,947

Segment operating income (loss) **
8,036

 
10,414

 
(7,443
)
 
11,007


*The cost of the manufacturing initiatives included in the basics segment operating income is $1.8 million, and management evaluates the performance of the segment excluding these charges. Excluding these costs the basics segment income is $7.2 million and $20.2 million for the three and nine months ended July 2, 2016, respectively.
**The net gain from the sale of The Game business that is included in the branded segment operating income is $5.6 million, and management evaluates the performance of the segment excluding this gain. Excluding that gain the branded segment's operating income was $4.8 million for the nine months ended June 27, 2015.

The following table reconciles the segment operating earnings to the Company's consolidated income before provision for income taxes (in thousands):
 
Three Months Ended
 
Nine Months Ended
 
July 2,
2016
 
June 27,
2015
 
July 2,
2016
 
June 27,
2015
Segment operating income
$
4,227

 
$
6,897

 
$
12,386

 
$
11,007

Unallocated interest expense
1,338

 
1,528

 
4,009

 
4,547

Consolidated income before provision for income taxes
$
2,889

 
$
5,369

 
$
8,377

 
$
6,460