Note J - Business Segments

9 Months Ended

Jul. 03, 2021

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

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 DTG2Go and Delta Activewear business units. We are a market leader in the on-demand, digital print and fulfillment industry, bringing DTG2Go's proprietary technology and innovation to the supply chain of our customers. Delta Activewear is a preferred supplier of activewear apparel to regional and global brands, direct to retail and through wholesale markets. We offer a broad range of apparel and accessories through our Delta Direct business under the Delta and Soffe brands, as well as other brands that we distribute utilizing our digital platform and network of fulfillment centers. In addition, our Global Brands & Retail Direct business serves our customers as their supply chain partner, from product development to shipment of their branded products, with the majority of products being sold with value-added services including embellishment, hangtags, and ticketing, so that they are ready for retail sale to end consumers.

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, outdoor retailers and traditional department stores, 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 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 fiscal 2020, 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 2021		June 2020			June 2021		June 2020
Segment net sales:
Delta Group	$	102,562	$	65,543		$	284,404	$	238,685
Salt Life Group		16,104		6,258			37,611		25,666
Total net sales	$	118,666	$	71,801		$	322,015	$	264,351
Segment operating earnings (loss):
Delta Group (1)	$	13,869	$	(17,468	)	$	28,394	$	(5,133	)
Salt Life Group		2,916		(628	)		4,726		175
Total segment operating earnings (loss)	$	16,785	$	(18,096	)	$	33,120	$	(4,958	)

⁽¹⁾ In fiscal 2021, the Delta Group operating earnings included $1.3 million of expense, reported within "Other loss (income), net", related to two catastrophic hurricanes that disrupted operations during the December 2020 quarter. For the three-months and nine-months ended June 2020, the Delta Group operating income (loss) included $23.1 million and $25.0 million, respectively, of expenses related to the COVID-19 pandemic. For the June 2020 quarter, these costs primarily related to the curtailment of manufacturing operations ($9.8 million), incremental costs to right size production to new forecasted demand ($2.6 million), increased accounts receivable and inventory reserves related to the heightened risks in the market as the U.S. continues its recovery ($6.6 million), and other expenses ($4.1 million). These costs are included within net sales ($0.5 million), cost of goods sold ($12.1 million), SG&A expenses ($2.4 million), and other loss (income), net ($8.1 million). The first nine months of fiscal 2020 includes an additional $1.9 million of costs related to the curtailment of manufacturing operations in cost of goods sold.

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

	Three Months Ended					Nine Months Ended
	June 2021		June 2020			June 2021		June 2020
Segment operating earnings (loss)	$	16,785	$	(18,096	)	$	33,120	$	(4,958	)
Unallocated corporate expenses		4,882		3,492			10,569		10,438
Unallocated interest expense		1,735		1,710			5,225		5,320
Consolidated earnings (loss) before provision for (benefit from) income taxes	$	10,168	$	(23,298	)	$	17,326	$	(20,716	)