DELTA APPAREL, INC, 10-Q filed on 2/5/2018
Quarterly Report
Document and Entity Information
3 Months Ended
Dec. 30, 2017
Jan. 24, 2018
Document and Entity Information [Abstract]
 
 
Entity Registrant Name
DELTA APPAREL, INC 
 
Entity Central Index Key
0001101396 
 
Current Fiscal Year End Date
--09-30 
 
Entity Filer Category
Accelerated Filer 
 
Document Type
10-Q 
 
Document Period End Date
Dec. 30, 2017 
 
Document Fiscal Year Focus
2018 
 
Document Fiscal Period Focus
Q1 
 
Amendment Flag
false 
 
Entity Common Stock, Shares Outstanding
 
7,211,374 
Condensed Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Dec. 30, 2017
Sep. 30, 2017
Current assets:
 
 
Cash and cash equivalents
$ 603 
$ 572 
Accounts receivable, less allowances of $1,502 and $1,433, respectively
51,010 
47,557 
Income tax receivable
404 
352 
Inventories, net
174,505 
174,551 
Note receivable
1,031 
2,016 
Prepaid expenses and other current assets
3,885 
2,646 
Total current assets
231,438 
227,694 
Property, plant and equipment, net of accumulated depreciation of $69,320 and $67,780, respectively
45,449 
42,706 
Goodwill
19,917 
19,917 
Intangibles, net
15,925 
16,151 
Deferred income taxes
2,656 
5,002 
Other assets
6,277 
6,332 
Total assets
321,662 
317,802 
Current liabilities:
 
 
Accounts payable
45,597 
47,183 
Accrued expenses
13,503 
17,704 
Current portion of long-term debt
6,600 
7,548 
Total current liabilities
65,700 
72,435 
Long-term debt, less current maturities
99,360 
85,306 
Income tax payable
8,058 
Other liabilities
4,734 
2,574 
Contingent consideration
1,300 
1,600 
Total liabilities
179,152 
161,915 
Shareholders’ equity:
 
 
Preferred stock—$0.01 par value, 2,000,000 shares authorized, none issued and outstanding
Common stock —$0.01 par value, 15,000,000 shares authorized, 9,646,972 shares issued, and 7,227,374 and 7,300,297 shares outstanding as of December 30, 2017, and September 30, 2017, respectively
96 
96 
Additional paid-in capital
59,856 
61,065 
Retained earnings
117,402 
127,358 
Accumulated other comprehensive income (loss)
51 
(35)
Treasury stock —2,419,598 and 2,346,675 shares as of December 30, 2017, and September 30, 2016, respectively
(34,895)
(32,597)
Total shareholders’ equity
142,510 
155,887 
Total liabilities and shareholders' equity
$ 321,662 
$ 317,802 
Condensed Consolidated Balance Sheets (Parenthetical) (USD $)
In Thousands, except Share data, unless otherwise specified
Dec. 30, 2017
Sep. 30, 2017
Statement of Financial Position [Abstract]
 
 
Allowances for accounts receivable
$ 1,502 
$ 1,433 
Accumulated Depreciation
$ 69,320 
$ 67,780 
Shareholders' equity:
 
 
Preferred stock, par value (in dollars per share)
$ 0.01 
$ 0.01 
Preferred stock, shares authorized
2,000,000 
2,000,000 
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, par value (in dollars per share)
$ 0.01 
$ 0.01 
Common stock, shares authorized
15,000,000 
15,000,000 
Common stock, shares issued
9,646,972 
9,646,972 
Common stock, shares outstanding
7,227,374 
7,300,297 
Treasury stock, shares
2,419,598 
2,346,675 
Condensed Consolidated Statements of Operations (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended
Dec. 30, 2017
Dec. 31, 2016
Income Statement [Abstract]
 
 
Net sales
$ 90,342 
$ 85,335 
Cost of goods sold
73,972 
67,777 
Gross profit
16,370 
17,558 
Selling, general and administrative expenses
14,979 
17,311 
Change in fair value of contingent consideration
(300)
(100)
Other income, net
(47)
(122)
Operating income
1,738 
469 
Interest expense, net
1,334 
1,301 
Income (loss) before provision for income taxes
404 
(832)
Provision for (benefit from) income taxes
10,356 
(225)
Net loss
$ (9,952)
$ (607)
Basic loss per share (in dollars per share)
$ (1.37)
$ (0.08)
Diluted loss per share (in dollars per share)
$ (1.37)
$ (0.08)
Weighted average number of shares outstanding (in shares)
7,268 
7,598 
Dilutive effect of stock options and awards (in shares)
Weighted average number of shares assuming dilution (in shares)
7,268 
7,598 
Condensed Consolidated Statements of Comprehensive Loss (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Dec. 30, 2017
Dec. 31, 2016
Statement of Comprehensive Income [Abstract]
 
 
Net loss
$ (9,952)
$ (607)
Other comprehensive income related to unrealized gain on derivatives, net of income tax
85 
49 
Comprehensive loss
$ (9,867)
$ (558)
Condensed Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Dec. 30, 2017
Dec. 31, 2016
Operating activities:
 
 
Net loss
$ (9,952)
$ (607)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
Depreciation and amortization
2,433 
2,415 
Amortization of deferred financing fees
76 
78 
Provision for deferred income taxes
2,346 
(194)
Non-cash stock compensation
437 
369 
Change in fair value of contingent consideration
(300)
(100)
Loss on disposal of equipment
Changes in operating assets and liabilities:
 
 
Accounts receivable, net
(3,453)
15,448 
Inventories, net
46 
(14,791)
Prepaid expenses and other assets
(1,252)
(770)
Other non-current assets
61 
Accounts payable
(1,902)
3,063 
Accrued expenses
(4,290)
(5,264)
Income taxes
8,007 
(150)
Other liabilities
(71)
44 
Net cash used in operating activities
(7,814)
(454)
Investing activities:
 
 
Purchases of property and equipment, net
(2,162)
(1,883)
Proceeds from sale of Junkfood assets
1,000 
Proceeds from sale of fixed assets
Net cash used in investing activities
(1,161)
(1,883)
Financing activities:
 
 
Proceeds from long-term debt
119,529 
115,707 
Repayment of long-term debt
(106,424)
(111,749)
Repayment of capital financing
(257)
(101)
Repurchase of common stock
(2,897)
(965)
Payment of withholding taxes on stock awards
(945)
(542)
Net cash provided by financing activities
9,006 
2,350 
Net increase in cash and cash equivalents
31 
13 
Cash and cash equivalents at beginning of period
572 
397 
Cash and cash equivalents at end of period
603 
410 
Supplemental cash flow information:
 
 
Cash paid during the period for interest
1,094 
1,209 
Cash paid during the period for income taxes
19 
94 
Non-cash financing activity - capital lease agreements
$ 3,050 
$ 1,619 
Basis of Presentation and Description of Business
Basis of Presentation and Description of Business
Basis of Presentation and Description of Business
We prepared the accompanying interim condensed consolidated financial statements in accordance with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles ("U.S. GAAP") for complete financial statements. We believe these Condensed Consolidated Financial Statements include all normal recurring adjustments considered necessary for a fair presentation. Operating results for the three-month period ended December 30, 2017, are not necessarily indicative of the results that may be expected for our fiscal year ending September 29, 2018. Although our various product lines are sold on a year-round basis, the demand for specific products or styles reflects some seasonality, with sales in our June quarter generally being the highest and sales in our December quarter generally being the lowest. For more information regarding our results of operations and financial position, refer to the Consolidated Financial Statements and footnotes included in our Annual Report on Form 10-K for our fiscal year ended September 30, 2017, filed with the United States Securities and Exchange Commission (“SEC”).
“Delta Apparel”, the “Company”, “we”, “us” and “our” are used interchangeably to refer to Delta Apparel, Inc. together with our domestic wholly-owned subsidiaries, including M.J. Soffe, LLC (“Soffe”), Culver City Clothing Company (f/k/a Junkfood Clothing Company) (“Junkfood”), Salt Life, LLC (“Salt Life”), and Art Gun, LLC (“Art Gun”), and other international subsidiaries, as appropriate to the context. On March 31, 2017, we sold substantially all of the assets comprising our Junkfood business to JMJD Ventures, LLC. See Note D—Divestitures, for further information on this transaction.
Delta Apparel, Inc. is an international apparel design, marketing, manufacturing and sourcing company that features a diverse portfolio of lifestyle basics and branded activewear apparel, headwear and related accessory products. We specialize in selling casual and athletic products through a variety of distribution channels and distribution tiers, including department stores, mid and mass channels, e-retailers, sporting goods and outdoor retailers, independent and specialty stores, and the U.S. military. Our products are also made available direct-to-consumer on our websites and in our branded retail stores. We believe this diversified distribution allows us to capitalize on our strengths to provide casual activewear to consumers purchasing from most types of retailers.
We design and internally manufacture the majority of our products, which allows us to offer a high degree of consistency and quality controls as well as leverage scale efficiencies. One of our strengths is the speed with which we can reach the market from design to delivery. We have manufacturing operations located in the United States, El Salvador, Honduras and Mexico, and use domestic and foreign contractors as additional sources of production. Our distribution facilities are strategically located throughout the United States to better serve our customers with same-day shipping on our catalog products and weekly replenishments to retailers.
We were incorporated in Georgia in 1999 and our headquarters is located at 322 South Main Street, Greenville, South Carolina 29601 (telephone number: 864-232-5200). Our common stock trades on the NYSE American exchange under the symbol “DLA”. We operate on a 52-53 week fiscal year ending on the Saturday closest to September 30. Our 2018 fiscal year is a 52-week year and will end on September 29, 2018. Our 2017 fiscal year was a 52-week year and ended on September 30, 2017.
Accounting Policies
Accounting Policies
Accounting Policies
Our accounting policies are consistent with those described in our Significant Accounting Policies in our Annual Report on Form 10-K for the fiscal year ended September 30, 2017, filed with the SEC.
New Accounting Standards
New Accounting Standards
New Accounting Standards
Recently Adopted Standards
In July 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2015-11, Simplifying the Measurement of Inventory, ("ASU 2015-11").  This new guidance requires an entity to measure inventory at the lower of cost and net realizable value. Currently, entities measure inventory at the lower of cost or market. ASU 2015-11 replaces market with net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.  Subsequent measurement is unchanged for inventory measured under last-in, first-out or the retail inventory method.  ASU 2015-11 requires prospective adoption for inventory measurements for fiscal years beginning after December 15, 2016, and interim periods within those years for public business entities.  Early application is permitted.  ASU 2015-11 was adopted in our fiscal year beginning October 1, 2017. The adoption of this standard did not have a material impact on our consolidated financial statements
Standards Not Yet Adopted
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, ("ASU 2014-09"). This new guidance requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. ASU 2014-09 is effective for annual periods beginning after December 15, 2017, for public business entities and permits the use of either the retrospective or cumulative effect transition method. Early application is permitted only for annual reporting periods beginning after December 15, 2016. ASU 2014-09 will therefore be effective in our fiscal year beginning September 30, 2018. Although we have not yet determined our adoption method, we have identified a committee, agreed on a methodology for review of our revenue arrangements and initiated the review process for adoption of this ASU, and are evaluating the effect that ASU 2014-09 will have on our Consolidated Financial Statements and related disclosures.
In February 2016, the FASB issued ASU No. 2016-02, Leases, ("ASU 2016-02"). ASU 2016-02 requires lessees to recognize assets and liabilities for most leases. All leases will be required to be recorded on the balance sheet with the exception of short-term leases. Early application is permitted. The guidance must be adopted using a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. ASU 2016-02 is effective for financial statements issued for annual periods beginning after December 15, 2018, and interim periods within those annual periods. ASU 2016-02 will therefore be effective in our fiscal year beginning September 29, 2019. We are evaluating the effect that ASU 2016-02 will have on our Consolidated Financial Statements and related disclosures.
Divestitures
Divestitures
Divestitures
On March 31, 2017, we completed the sale of substantially all of the assets comprising our Junkfood business to JMJD Ventures, LLC for $27.9 million. The business sold consisted of vintage-inspired Junk Food branded and private label products sold in the United States and internationally. We received cash at closing of $25.0 million and recorded a $2.9 million note receivable with payments due between June 30, 2017, and March 30, 2018. The note receivable was amended on June 29, 2017, to revise the repayment schedule for payments to be made between September 29, 2017, and March 30, 2018.
We realized a $1.3 million pre-tax gain on the sale of the Junkfood business resulting from the proceeds of $27.9 million less the costs of assets sold and other expenses, and less direct selling costs associated with the transaction. The pre-tax gain was recorded in the Condensed Consolidated Statement of Operations as a Gain on sale of business in our 2017 second fiscal quarter as a Gain on sale of business.
Inventories
Inventories
Inventories
Inventories, net of $9.9 million and $9.8 million in reserves, as of December 30, 2017, and September 30, 2017, respectively, consisted of the following (in thousands):
 
December 30,
2017
 
September 30,
2017
Raw materials
$
8,639

 
$
8,973

Work in process
16,179

 
18,543

Finished goods
149,687

 
147,035

 
$
174,505

 
$
174,551

Debt
Debt
Debt
On May 10, 2016, we entered into a Fifth Amended and Restated Credit Agreement (the “Amended Credit Agreement”) with Wells Fargo Bank, National Association (“Wells Fargo”), as Administrative Agent, the Sole Lead Arranger and the Sole Book Runner, and the financial institutions named therein as Lenders, which are Wells Fargo, PNC Bank, National Association and Regions Bank. Our subsidiaries, M.J. Soffe, LLC, Culver City Clothing Company (f/k/a Junkfood Clothing Company), Salt Life, LLC, and Art Gun, LLC (together with the Company, the “Companies”), are co-borrowers under the Amended Credit Agreement.
On November 27, 2017, Delta Apparel, Soffe, Junkfood, Salt Life, and Art Gun (collectively, the “Borrowers”) entered into a First Amendment to the Fifth Amended and Restated Credit Agreement with Wells Fargo and the other lenders set forth therein (the “First Amendment”).
The First Amendment amends the definition of Fixed Charge Coverage Ratio within the Amended Credit Agreement to permit up to $10 million of the proceeds received from the March 31, 2017, sale of certain assets of the Junkfood business to be used towards share repurchases for up to one year from the date of that transaction. In addition, the definition of Permitted Purchase Money Indebtedness is amended to extend the time period within which the Borrowers may enter into capital leases and to increase the aggregate principal amount of such leases into which the Borrowers may enter to up to $15 million. The definition of Permitted Investments is also amended to permit the Borrowers to make investments in entities that are not a party to the Amended Credit Agreement in an aggregate amount of up to $2 million. The First Amendment also allows the change in the name of our Junkfood Clothing Company subsidiary to Culver City Clothing Company. There were no changes to the Agreement related to interest rate, borrowing capacity, or maturity.
The Amended Credit Agreement allows us to borrow up to $145 million (subject to borrowing base limitations), including a maximum of $25 million in letters of credit. Provided that no event of default exists, we have the option to increase the maximum credit to $200 million (subject to borrowing base limitations), conditioned upon the Administrative Agent's ability to secure additional commitments and customary closing conditions. The credit facility matures on May 10, 2021. In fiscal year 2016, we paid $1.0 million in financing costs associated with the Amended Credit Agreement.
As of December 30, 2017, there was $90.1 million outstanding under our U.S. revolving credit facility at an average interest rate of 3.3% and additional borrowing availability of $26.6 million. This credit facility includes a financial covenant requiring that if the amount of availability falls below the threshold amounts set forth in the Amended Credit Agreement, our Fixed Charge Coverage Ratio (“FCCR”) (as defined in the Amended Credit Agreement) for the preceding 12-month period must not be less than 1.1 to 1.0. We were not subject to the FCCR covenant at December 30, 2017, because our availability was above the minimum required under the Amended Credit Agreement, and we would have satisfied our financial covenant had we been subject to it. At December 30, 2017, and September 30, 2017, there was $9.0 million and $7.7 million, respectively, of retained earnings free of restrictions to make cash dividends or stock repurchases.
The Amended Credit Agreement contains a subjective acceleration clause and a “springing” lockbox arrangement (as defined in FASB Codification No. 470, Debt ("ASC 470")) whereby remittances from customers will be forwarded to our general bank account and will not reduce the outstanding debt until and unless a specified event or an event of default occurs. Pursuant to ASC 470, we classify borrowings under the Amended Credit Agreement as long-term debt.
In August 2013, we acquired Salt Life and issued two promissory notes in the aggregate principal amount of $22.0 million, which included a one-time installment of $9.0 million that was due and paid as required on September 30, 2014, and quarterly installments commencing on March 31, 2015, with the final installment due on June 30, 2019. The promissory notes are zero-interest notes and state that interest will be imputed as required under Section 1274 of the Internal Revenue Code. We imputed interest at 1.92% on the promissory note that matured June 30, 2016, and was paid in full as required. We impute interest at 3.62% on the promissory note that matures on June 30, 2019. At December 30, 2017, the discounted value of the promissory note outstanding was $3.9 million.
Since March 2011, we have entered into loans and a revolving credit facility with Banco Ficohsa, a Honduran bank, to finance both the operations and capital expansion of our Honduran facilities. Each of these loans is secured by a first-priority lien on the assets of our Honduran operations and is not guaranteed by our U.S. entities. These loans are denominated in U.S. dollars and the carrying value of the debt approximates its fair value. The revolving credit facility requires minimum payments during each six-month period of the 18-month term; however, the loan agreement permits additional drawdowns to the extent payments are made and certain objective covenants are met. The current revolving Honduran debt, by its nature, is not long-term, as it requires scheduled payments each six months. However, as the loan permits us to re-borrow funds up to the amount repaid, subject to certain covenants, and we intend to re-borrow funds, subject to those covenants, the amounts have been classified as long-term debt.
Additional information about these loans and the outstanding balances as of December 30, 2017, is as follows (in thousands):
 
December 30,
2017
Revolving credit facility established March 2011, interest at 8.0% due March 2019
$
4,804

Term loan established March 2011, interest at 7.0%, payable monthly with a seven-year term
243

Term loan established November 2014, interest at 7.5%, payable monthly with a six-year term
1,850

Term loan established June 2016, interest at 8.0%, payable monthly with a six-year term
1,286

Term loan established September 2017, interest at 8.0%, payable monthly with a six-year term
3,817

Selling, General and Administrative Expense
Selling, General and Administrative Expense
Selling, General and Administrative Expense
We include in selling, general and administrative ("SG&A") expenses costs incurred subsequent to the receipt of finished goods at our distribution facilities, such as the cost of stocking, warehousing, picking, packing, and shipping goods for delivery to our customers. Distribution costs included in SG&A expenses totaled $3.9 million and $3.5 million for the three-month periods ended December 30, 2017, and December 31, 2016, respectively. In addition, SG&A expenses include costs related to sales associates, administrative personnel, advertising and marketing expenses, royalty payments on licensed products and other general and administrative expenses.
Stock-Based Compensation
Stock-Based Compensation
Stock-Based Compensation
On February 4, 2015, our shareholders re-approved the Delta Apparel, Inc. 2010 Stock Plan ("2010 Stock Plan") that was originally approved by our shareholders on November 11, 2010. Since November 2010, no additional awards have been or will be granted under either the Delta Apparel Stock Option Plan ("Option Plan") or the Delta Apparel Incentive Stock Award Plan ("Award Plan") and, instead, all stock awards have been and will continue to be granted under the 2010 Stock Plan.
We account for these plans pursuant to ASC 718, SAB 107, SAB 110, and ASU 2016-09. Shares are generally issued from treasury stock upon exercise of the options or the vesting of the restricted stock units and performance units.
Compensation expense is recorded on the SG&A expense line item in our Condensed Consolidated Statements of Operations over the vesting periods. During the three-month periods ended December 30, 2017, and December 31, 2016, we recognized $0.5 million and $0.6 million, respectively, in stock-based compensation expense.
2010 Stock Plan
Under the 2010 Stock Plan, the Compensation Committee of our Board of Directors has the authority to determine the employees and directors to whom awards may be granted and the size and type of each award and manner in which such awards will vest. The awards available under the plan consist of stock options, stock appreciation rights, restricted stock, restricted stock units, performance stock, performance units, and other stock and cash awards. The aggregate number of shares of common stock that may be delivered under the 2010 Stock Plan is 500,000 plus any shares of common stock subject to outstanding awards under the Option Plan or Award Plan that are subsequently forfeited or terminated for any reason before being exercised. The 2010 Stock Plan limits the number of shares that may be covered by awards to any participant in a given calendar year and also limits the aggregate awards of restricted stock, restricted stock units and performance stock granted in a given calendar year. If a participant dies or becomes disabled (as defined in the 2010 Stock Plan) while employed by the Company or serving as a director, all unvested awards become fully vested. The Compensation Committee is authorized to establish the terms and conditions of awards granted under the 2010 Stock Plan, to establish, amend and rescind any rules and regulations relating to the 2010 Stock Plan, and to make any other determinations that it deems necessary.
During the three-month period ended December 30, 2017, restricted stock units and performance units representing 54,602 and 92,068 shares of our common stock, respectively, vested upon the filing of our Annual Report on Form 10-K for the fiscal year ended September 30, 2017, and were issued in accordance with their respective agreements. One-half of the restricted stock units were payable in common stock and one-half were payable in cash. Of the performance units, 72,138 were payable in common stock and 19,930 were payable in cash.
During the three-month period ended December 30, 2017, restricted stock units and performance stock units, each consisting of 55,750 shares of our common stock, were issued and are eligible to vest upon the filing of our Annual Report on Form 10-K for the fiscal year ended September 28, 2019. One-half of the restricted stock units and one-half of the performance units are payable in common stock and one-half are payable in cash.
During the three-month period ended December 31, 2016, restricted stock units and performance units representing 8,438 and 53,248 shares of our common stock, respectively, vested upon the filing of our Annual Report on Form 10-K for the fiscal year ended October 1, 2016, and were issued in accordance with their respective agreements. The restricted stock units and performance units are payable one-half in common stock and one-half in cash.
As of December 30, 2017, there was $4.1 million of total unrecognized compensation cost related to unvested awards granted under the 2010 Stock Plan. This cost is expected to be recognized over a period of 3 years.
Option Plan
All options granted under the Option Plan vested prior to October 3, 2015. As such, no expense was recognized during each of the three-month periods ended December 30, 2017, and December 31, 2016. No options were exercised during the three-month period ended December 30, 2017.
Purchase Contracts
Purchase Contracts
Purchase Contracts
We have entered into agreements, and have fixed prices, to purchase yarn, finished fabric, and finished apparel and headwear products. At December 30, 2017, minimum payments under these contracts were as follows (in thousands):
Yarn
$
3,252

Finished fabric
2,271

Finished products
21,995

 
$
27,518

Business Segments
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.
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 unembellished knit apparel under the main brands of Delta Platinum™, Delta Dri®, Delta Magnum Weight®, and Delta Pro 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 proprietary technology, Art Gun 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 branded segment is comprised of our business units focused on specialized apparel garments, headwear, and related accessories to meet consumer preferences and fashion trends, and includes our Salt Life, Soffe, and Coast business units. Our branded segment also included our Junkfood business unit prior to its disposition on March 31, 2017. These branded products are sold through specialty and boutique shops, traditional department stores and mid-tier retailers, sporting goods stores, e-retailers and the U.S. military, as well as direct-to-consumer through branded ecommerce sites and "brick and mortar" retail stores. Products in this segment are marketed under our lifestyle brands of Salt Life®, Soffe®, 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 and income taxes ("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 the fiscal year ended September 30, 2017, 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
 
December 30, 2017
 
December 31, 2016
Segment net sales:
 
 
 
Basics
$
73,176

 
$
60,838

Branded
17,166

 
24,497

Total net sales
$
90,342

 
$
85,335

 
 
 
 
Segment operating income (loss):
 
 
 
Basics
$
4,189

 
$
4,684

Branded
458

 
(1,000
)
Total segment operating income
$
4,647

 
$
3,684


The following table reconciles the segment operating income to the consolidated income (loss) before provision for (benefit from) income taxes (in thousands):
 
Three Months Ended
 
December 30, 2017
 
December 31, 2016
Segment operating income
$
4,647

 
$
3,684

Unallocated corporate expenses
2,909

 
3,215

Unallocated interest expense
1,334

 
1,301

Consolidated income (loss) before provision for (benefit from) income taxes
$
404

 
$
(832
)
Income Taxes
Income Taxes
of Contents
Note K—Income Taxes
On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “New Tax Legislation”) was enacted. The New Tax Legislation significantly revised the U.S. corporate income tax code by, among other things, lowering federal corporate income tax rates, implementing a modified territorial tax system and imposing a repatriation tax on deemed repatriated cumulative earnings of foreign subsidiaries. During the three-month period ended December 30, 2017, we recognized provisional amounts totaling $10.6 million of tax expense. We have made reasonable estimates of the effects on our existing deferred tax balances and the one-time transition tax; however, these amounts may change as more information becomes available. We accounted for the $10.6 million provisional amount as a discrete item for tax provision purposes, recording tax expense on our best estimate of the effect of the New Tax Legislation. Excluding the effect of this discrete item, the effective tax rate on operations for the three-month period ended December 30, 2017, was (46.4%). This tax benefit relates to stock option excess benefits as a result from our adoption of ASU 2016-09. This compares to an effective income tax rate of 27.0% for the same period in the prior year, and 5.9% for the fiscal year ended September 30, 2017.
We benefit from having income in foreign jurisdictions that are either exempt from income taxes or have tax rates that are lower than those in the United States. Based on our current projected pre-tax income and the anticipated amount of U.S. taxable income compared to profits in the offshore taxable and tax-free jurisdictions in which we operate, our estimated annual income tax rate for the fiscal year ending September 29, 2018, excluding the discrete tax expense associated with the New Tax Legislation, is currently expected to be approximately 12%-13%. The change in the federal statutory rate from 34% to 21% as a result of the New Tax Legislation is effective at the beginning of our fiscal year. As such, the blended federal statutory tax rate for the fiscal year is anticipated to be approximately 24.3%. However, changes in the mix of U.S. taxable income compared to profits in tax-free or lower-tax jurisdictions can have a significant impact on our overall effective tax rate. In addition, the impact of the New Tax Legislation may differ from our initial provisional estimates, possibly materially, due to, among other things, changes in interpretations and assumptions made regarding the New Tax Legislation, guidance that may be issued and actions we may take as a result of the New Tax Legislation.
Provisional amounts
As noted above we consider the estimate of the effects on our existing deferred tax balances and the one-time transition tax to be provisional.
Deferred tax assets and liabilities: We remeasured our deferred tax assets and liabilities based on an estimated scheduling of when we anticipate these amounts will reverse and by applying estimated rates based on the period we believe they will reverse. However, we are still analyzing certain aspects of the New Tax Legislation and refining our scheduling and calculations, which could potentially affect the remeasurement of these balances. The provisional amount of expense related to the remeasurement of our deferred tax balance was approximately $1.1 million which was recognized during the quarter.
Transition tax: Our current estimate of the one-time transition tax is based on an estimate of our total earnings and profits (E&P) from our foreign subsidiaries which were previously deferred from US income taxes. A deferred tax liability for such undistributed earnings was not previously recognized since the earnings are considered to be permanently reinvested. We recorded a provisional amount related to this one-time transition tax of $9.5 million during the quarter which will be paid over eight years. We anticipate that the benefit resulting from the reduction of the federal tax rate from 34% to 21% will offset the future payments of the transition tax, resulting in minimal cash flow impact. We have not completed our analysis of the total E&P or the split between liquid and illiquid assets for our foreign subsidiaries. As such this amount may change when we finalize our analysis.
State tax effect: We continued to apply ASC 740 based on the provisions of the state tax laws that were in effect immediately prior to the New Tax Legislation being enacted. It is currently impractical to determine the changes to our state provision resulting from the New Tax Legislation; however, we believe the impact will not be material.
We file income tax returns in the U.S. federal jurisdiction and various state, local and foreign jurisdictions. Tax years 2014, 2015 and 2016, according to statute and with few exceptions, remain open to examination by various federal, state, local and foreign jurisdictions.
Derivatives and Fair Value Measurements
Derivatives and Fair Value Measurements
Derivatives and Fair Value Measurements
From time to time, we may use interest rate swaps or other instruments to manage our interest rate exposure and reduce the impact of future interest rate changes. These financial instruments are not used for trading or speculative purposes. We have designated our interest rate swap contracts as cash flow hedges of our future interest payments. As a result, the gains and losses on the swap contracts are reported as a component of other comprehensive income and are reclassified into interest expense as the related interest payments are made. Outstanding instruments as of December 30, 2017, are as follows:
 
Effective Date
 
Notational
Amount
 
Fixed LIBOR Rate
 
Maturity Date
Interest Rate Swap
July 19, 2017
 
$10 million
 
1.74%
 
July 19, 2019
Interest Rate Swap
July 19, 2017
 
$10 million
 
1.99%
 
May 10, 2021

From time to time, we may purchase cotton option contracts to economically hedge the risk related to market fluctuations in the cost of cotton used in our operations. We do not receive hedge accounting treatment for these derivatives. As such, the realized and unrealized gains and losses associated with them are recorded within cost of goods sold on the Condensed Consolidated Statement of Operations.
FASB Codification No. 820, Fair Value Measurements and Disclosures (“ASC 820”), defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Assets and liabilities measured at fair value are grouped in three levels. The levels prioritize the inputs used to measure the fair value of the assets or liabilities. These levels are:
Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 – Inputs other than quoted prices that are observable for assets and liabilities, either directly or indirectly. These inputs include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are less active.
Level 3 – Unobservable inputs that are supported by little or no market activity for assets or liabilities and includes certain pricing models, discounted cash flow methodologies and similar techniques.
The following financial assets (liabilities) are measured at fair value on a recurring basis (in thousands):
 
Fair Value Measurements Using
Period Ended
Total
 
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Interest Rate Swaps
 
 
 
 
 
 
 
December 30, 2017
$
83

 

 
$
83

 

September 30, 2017
(56
)
 

 
(56
)
 

 
 
 
 
 
 
 
 
Cotton Options
 
 
 

 
 
 
 
December 30, 2017
$
(1
)
 
$
(1
)
 

 

September 30, 2017
(125
)
 
(125
)
 

 

 
 
 
 
 
 
 
 
Contingent Consideration
 
 
 
 
 
 
 
December 30, 2017
$
(1,300
)
 

 

 
$
(1,300
)
September 30, 2017
(1,600
)
 

 

 
(1,600
)

The fair value of the interest rate swap agreements was derived from discounted cash flow analysis based on the terms of the contract and the forward interest rate curves adjusted for our credit risk, which fall in Level 2 of the fair value hierarchy. At December 31, 2017, book value for fixed rate debt approximates fair value based on quoted market prices for the same or similar issues or on the current rates offered to us for debt of the same remaining maturities (a Level 2 fair value measurement). 
The following table summarizes the fair value and presentation in the Condensed Consolidated Balance Sheets for derivatives related to our interest swap agreements as of December 30, 2017, and September 30, 2017 (in thousands):
 
December 30,
2017
 
September 30,
2017
Other assets
$
83

 
$

Deferred tax assets

 
21

Accrued expenses

 
(56
)
Deferred tax liabilities
(32
)
 

Accumulated other comprehensive income (loss)
$
51

 
$
(35
)

In August 2013, we acquired Salt Life and issued contingent consideration payable in cash after the end of calendar year 2019 if financial performance targets involving the sale of Salt Life-branded products are met during the 2019 calendar year.  We used a Monte Carlo model utilizing the historical results and projected cash flows based on the contractually defined terms, discounted as necessary, to estimate the fair value of the contingent consideration for Salt Life at the acquisition date as well as to remeasure the contingent consideration related to the acquisition of Salt Life at each reporting period.  Accordingly, the fair value measurement for contingent consideration falls in Level 3 of the fair value hierarchy. 
At December 30, 2017, we had $1.3 million accrued in contingent consideration related to the Salt Life acquisition, a $0.3 million reduction from the accrual at September 30, 2017. The reduction in the fair value of contingent consideration is based on the inputs into the Monte Carlo model, including the time remaining in the measurement period. The sales expectations for calendar year 2019 have been reduced from the sales expectations used in the valuation of contingent consideration at acquisition due to our current view of the retail environment. Our expectations are consistent with those at September 30, 2017.
Legal Proceedings
Legal Proceedings
Legal Proceedings
The Sports Authority Bankruptcy Litigation
Soffe is involved in several related litigation matters stemming from The Sports Authority's ("TSA") March 2, 2016, filing of a voluntary petition(s) for relief under Chapter 11 of the United States Bankruptcy Code (the "TSA Bankruptcy"). Prior to such filing, Soffe provided TSA with products to be sold on a consignment basis pursuant to a "pay by scan" agreement and the litigation matters relate to Soffe's interest in the products it provided TSA on a consignment basis (the "Products") and the proceeds derived from the sale of such products (the "Proceeds").
TSA Stores, Inc. and related entities TSA Ponce, Inc. and TSA Caribe, Inc. filed an action against Soffe on March 16, 2016, in the United States Bankruptcy Court for the District of Delaware (the "TSA Action") essentially seeking a declaratory judgment that: (i) Soffe does not own the Products but rather has a security interest that is not perfected or senior and is avoidable; (ii) Soffe only has an unsecured claim against TSA; (iii) TSA and TSA's secured creditors have valid, unavoidable and senior rights in the Products and the Products are the property of TSA’s estate; (iv) Soffe does not have a perfected purchase money security interest in the Products; (v) Soffe is not entitled to a return of the Products; and (vi) TSA can continue to sell the Products and Soffe is not entitled to any proceeds from such sales other than as an unsecured creditor. The TSA Action also contains claims seeking to avoid Soffe's filing of a financing statement related to the Products as a preference and recover the value of that transfer as well as to disallow Soffe's claims until it has returned preferential transfers or their associated value. TSA also brings a claim for a permanent injunction barring Soffe from taking certain actions. We believe that many of the claims in the TSA Action, including TSA’s claim for injunction, are now moot as a result of Soffe’s agreement to permit TSA to continue selling the Products in TSA’s going-out-of-business sale.
On May 16, 2016, TSA lender Wilmington Savings Fund Society, FSB, as Successor Administrative and Collateral Agent ("WSFS"), intervened in the TSA Action seeking a declaratory judgment that: (i) WSFS has a perfected interest in the Products and Proceeds that is senior to Soffe's interest; and (ii) the Proceeds paid to Soffe must be disgorged pursuant to an order previously issued by the court. WSFS's intervening complaint also contains a separate claim seeking the disgorgement of all Proceeds paid to Soffe along with accrued and unpaid interest.
Soffe has asserted counterclaims against WSFS in the TSA Action essentially seeking a declaratory judgment that: (i) WSFS is not perfected in the Products; and (ii) WSFS's interest in the Products is subordinate to Soffe's interest.
On May 24, 2016, Soffe joined an appeal filed by a number of TSA consignment vendors in the United States District Court for the District of Delaware challenging an order issued in the TSA Bankruptcy that, should WSFS or TSA succeed in the TSA Action, granted TSA and/or WSFS a lien on all Proceeds received by Soffe and requiring the automatic disgorgement of such Proceeds. Soffe and another entity are the remaining consignment vendors pursuing this appeal.
Although we will continue to vigorously defend against the TSA Action and pursue the above-referenced counterclaims and appeal, should TSA and/or WSFS ultimately prevail on their claims, we could be forced to disgorge all Proceeds received and forfeit our ownership rights in any Products that remain in TSA's possession. We believe the range of possible loss in this matter is currently $0 to $3.3 million; however, it is too early to determine the probable outcome and, therefore, no amount has been accrued related to this matter.
In addition, at times we are party to various legal claims, actions and complaints. We believe that, as a result of legal defenses, insurance arrangements, and indemnification provisions with parties believed to be financially capable, such actions should not have a material effect on our operations, financial condition, or liquidity.
Repurchase of Common Stock
Repurchase of Common Stock
Repurchase of Common Stock
As of December 30, 2017, our Board of Directors authorized management to use up to $50.0 million to repurchase stock in open market transactions under our Stock Repurchase Program.
During the December quarter of fiscal year 2018, we purchased 145,124 shares of our common stock for a total cost of $3.0 million. Through December 30, 2017, we have purchased 3,038,611 shares of our common stock for an aggregate of $41.7 million since the inception of our Stock Repurchase Program. All purchases were made at the discretion of management and pursuant to the safe harbor provisions of SEC Rule 10b-18. As of December 30, 2017, $8.3 million remained available for future purchases under our Stock Repurchase Program, which does not have an expiration date.
The following table summarizes the purchases of our common stock for the quarter ended December 30, 2017:
Period
 
Total Number of Shares Purchased
 
Average Price Paid per Share
 
Total Number of Shares Purchased as Part of Publicly Announced Plans
 
Dollar Value of Shares that May Yet Be Purchased Under the Plans
October 1, 2017 to November 4, 2017
 
29,081

 
$21.04
 
29,081

 

$10.7
 million
November 5, 2017 to December 2, 2017
 
46,444

 
20.67
 
46,444

 
9.7
 million
December 3, 2017 to December 30, 2017
 
69,599

 
20.56
 
69,599

 
8.3
 million
Total
 
145,124

 
$20.69
 
145,124

 

$8.3
 million
Goodwill and Intangible Assets
Goodwill and Intangible Assets
Goodwill and Intangible Assets
Components of intangible assets consist of the following (in thousands):
 
December 30, 2017
 
September 30, 2017
 
 
 
Cost
Accumulated Amortization
Net Value
 
Cost
Accumulated Amortization
Net Value
 
Economic Life
 
 
 
 
 
 
 
 
 
 
Goodwill
$
19,917

$

$
19,917

 
$
19,917

$

$
19,917

 
N/A
 
 
 
 
 
 
 
 
 
 
Intangibles:
 
 
 
 
 
 
 
 
 
Tradename/trademarks
$
16,090

$
(2,329
)
$
13,761

 
$
16,090

$
(2,193
)
$
13,897

 
20 – 30 yrs
Technology
1,220

(978
)
242

 
1,220

(947
)
273

 
10 yrs
License agreements
2,100

(449
)
1,651

 
2,100

(423
)
1,677

 
15 – 30 yrs
Non-compete agreements
1,037

(766
)
271

 
1,037

(733
)
304

 
4 – 8.5 yrs
Total intangibles
$
20,447

$
(4,522
)
$
15,925

 
$
20,447

$
(4,296
)
$
16,151

 
 


Goodwill represents the acquired goodwill net of the cumulative impairment losses recorded in fiscal year 2011 of $0.6 million. The goodwill recorded on our financial statements is included in the branded segment.
Amortization expense for intangible assets was $0.2 million for the three-month period ended December 30, 2017, and $0.3 million for the three-month period ended December 31, 2016. Amortization expense is estimated to be approximately $0.9 million for each of fiscal years 2018 and 2019, approximately $0.7 million for fiscal year 2020, and approximately $0.6 million for each of fiscal years 2021 and 2022.
Selling, General and Administrative Expense (Policies)
Selling, General and Administrative Expenses
We include in selling, general and administrative ("SG&A") expenses costs incurred subsequent to the receipt of finished goods at our distribution facilities, such as the cost of stocking, warehousing, picking, packing, and shipping goods for delivery to our customers.
Inventories (Tables)
Schedule of Inventories, Net of Reserves
Inventories, net of $9.9 million and $9.8 million in reserves, as of December 30, 2017, and September 30, 2017, respectively, consisted of the following (in thousands):
 
December 30,
2017
 
September 30,
2017
Raw materials
$
8,639

 
$
8,973

Work in process
16,179

 
18,543

Finished goods
149,687

 
147,035

 
$
174,505

 
$
174,551

Debt (Tables)
Schedule of Long-term Debt Instruments
Additional information about these loans and the outstanding balances as of December 30, 2017, is as follows (in thousands):
 
December 30,
2017
Revolving credit facility established March 2011, interest at 8.0% due March 2019
$
4,804

Term loan established March 2011, interest at 7.0%, payable monthly with a seven-year term
243

Term loan established November 2014, interest at 7.5%, payable monthly with a six-year term
1,850

Term loan established June 2016, interest at 8.0%, payable monthly with a six-year term
1,286

Term loan established September 2017, interest at 8.0%, payable monthly with a six-year term
3,817

Purchase Contracts (Tables)
Purchase contracts minimum payments
At December 30, 2017, minimum payments under these contracts were as follows (in thousands):
Yarn
$
3,252

Finished fabric
2,271

Finished products
21,995

 
$
27,518

Business Segments (Tables)
Segment reporting information by segment
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 30, 2017, 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
 
December 30, 2017
 
December 31, 2016
Segment net sales:
 
 
 
Basics
$
73,176

 
$
60,838

Branded
17,166

 
24,497

Total net sales
$
90,342

 
$
85,335

 
 
 
 
Segment operating income (loss):
 
 
 
Basics
$
4,189

 
$
4,684

Branded
458

 
(1,000
)
Total segment operating income
$
4,647

 
$
3,684


The following table reconciles the segment operating income to the consolidated income (loss) before provision for (benefit from) income taxes (in thousands):
 
Three Months Ended
 
December 30, 2017
 
December 31, 2016
Segment operating income
$
4,647

 
$
3,684

Unallocated corporate expenses
2,909

 
3,215

Unallocated interest expense
1,334

 
1,301

Consolidated income (loss) before provision for (benefit from) income taxes
$
404

 
$
(832
)
Derivatives and Fair Value Measurements (Tables)
Outstanding instruments as of December 30, 2017, are as follows:
 
Effective Date
 
Notational
Amount
 
Fixed LIBOR Rate
 
Maturity Date
Interest Rate Swap
July 19, 2017
 
$10 million
 
1.74%
 
July 19, 2019
Interest Rate Swap
July 19, 2017
 
$10 million
 
1.99%
 
May 10, 2021
The following financial assets (liabilities) are measured at fair value on a recurring basis (in thousands):
 
Fair Value Measurements Using
Period Ended
Total
 
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Interest Rate Swaps
 
 
 
 
 
 
 
December 30, 2017
$
83

 

 
$
83

 

September 30, 2017
(56
)
 

 
(56
)
 

 
 
 
 
 
 
 
 
Cotton Options
 
 
 

 
 
 
 
December 30, 2017
$
(1
)
 
$
(1
)
 

 

September 30, 2017
(125
)
 
(125
)
 

 

 
 
 
 
 
 
 
 
Contingent Consideration
 
 
 
 
 
 
 
December 30, 2017
$
(1,300
)
 

 

 
$
(1,300
)
September 30, 2017
(1,600
)
 

 

 
(1,600
)
The following table summarizes the fair value and presentation in the Condensed Consolidated Balance Sheets for derivatives related to our interest swap agreements as of December 30, 2017, and September 30, 2017 (in thousands):
 
December 30,
2017
 
September 30,
2017
Other assets
$
83

 
$

Deferred tax assets

 
21

Accrued expenses

 
(56
)
Deferred tax liabilities
(32
)
 

Accumulated other comprehensive income (loss)
$
51

 
$
(35
)
Goodwill and Intangible Assets (Tables)
Components of Intangible Assets
Components of intangible assets consist of the following (in thousands):
 
December 30, 2017
 
September 30, 2017
 
 
 
Cost
Accumulated Amortization
Net Value
 
Cost
Accumulated Amortization
Net Value
 
Economic Life
 
 
 
 
 
 
 
 
 
 
Goodwill
$
19,917

$

$
19,917

 
$
19,917

$

$
19,917

 
N/A
 
 
 
 
 
 
 
 
 
 
Intangibles:
 
 
 
 
 
 
 
 
 
Tradename/trademarks
$
16,090

$
(2,329
)
$
13,761

 
$
16,090

$
(2,193
)
$
13,897

 
20 – 30 yrs
Technology
1,220

(978
)
242

 
1,220

(947
)
273

 
10 yrs
License agreements
2,100

(449
)
1,651

 
2,100

(423
)
1,677

 
15 – 30 yrs
Non-compete agreements
1,037

(766
)
271

 
1,037

(733
)
304

 
4 – 8.5 yrs
Total intangibles
$
20,447

$
(4,522
)
$
15,925

 
$
20,447

$
(4,296
)
$
16,151

 
 
New Accounting Standards (Narrative) (Details)
3 Months Ended
Dec. 30, 2017
Dec. 31, 2016
Jul. 1, 2017
Accounting Standards Update 2016-09
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
 
 
 
Diluted earnings per share (in dollars per share)
$ (1.37)
$ (0.08)
$ (0.01)
Divestitures (Details) (Disposed of by Sale, Junkfood, USD $)
In Millions, unless otherwise specified
0 Months Ended
Mar. 31, 2017
Mar. 31, 2017
Disposed of by Sale |
Junkfood
 
 
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
 
 
Consideration from sale
 
$ 27.9 
Sale of business
25.0 
 
Note receivable
 
2.9 
Gain on sale of asset
$ 1.3 
 
Inventories (Details) (USD $)
Dec. 30, 2017
Sep. 30, 2017
Inventory Disclosure [Abstract]
 
 
Inventory valuation reserves
$ 9,900,000 
$ 9,800,000 
Inventories, net of reserves:
 
 
Raw materials
8,639,000 
8,973,000 
Work in process
16,179,000 
18,543,000 
Finished goods
149,687,000 
147,035,000 
Inventories, net
$ 174,505,000 
$ 174,551,000 
Debt (Schedule of Debt) (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Dec. 30, 2017
Term Loan |
Term loan established March, 2011
 
Debt Instrument [Line Items]
 
Long-term Debt
$ 243 
Stated interest rate (percentage)
7.00% 
Debt instrument, term (in years)
7 years 
Term Loan |
Term loan established November, 2014, interest at 7.5%, payable monthly with a six-year term
 
Debt Instrument [Line Items]
 
Long-term Debt
1,850 
Stated interest rate (percentage)
7.50% 
Debt instrument, term (in years)
6 years 
Term Loan |
Term loan established June, 2016
 
Debt Instrument [Line Items]
 
Long-term Debt
1,286 
Stated interest rate (percentage)
8.00% 
Debt instrument, term (in years)
6 years 
Secured Debt |
Term Loan Established September, 2017
 
Debt Instrument [Line Items]
 
Long-term Debt
3,817 
Stated interest rate (percentage)
8.00% 
Debt instrument, term (in years)
6 years 
Revolving Credit Facility |
Line of Credit
 
Debt Instrument [Line Items]
 
Long-term Debt
$ 4,804 
Stated interest rate (percentage)
8.00% 
Debt (Narrative) (Details) (USD $)
3 Months Ended 12 Months Ended 0 Months Ended 3 Months Ended
Nov. 27, 2017
Restrictions on Proceeds from Debt for Payment of Dividend and Stock Repurchase, Maximum Aggregate Amount of Dividends and Stock Repurchases Permitted
Revolving Credit Facility
Dec. 30, 2017
Revolving Credit Facility, due May 2017
Revolving Credit Facility
Sep. 30, 2017
Revolving Credit Facility, due May 2017
Revolving Credit Facility
Dec. 30, 2017
Revolving Credit Facility, due May 2016
Revolving Credit Facility
Oct. 1, 2016
Revolving Credit Facility, due May 2016
Revolving Credit Facility
Nov. 27, 2017
Capital Lease and Increase Aggregate Principal Amount Such Leases Borrower May Enter Into
Revolving Credit Facility
Nov. 27, 2017
Investments in Entities Not a Party to Amended Credit Agreement
Revolving Credit Facility
Aug. 27, 2013
Salt Life Acquisition
Promissory Note
debt_instrument
Dec. 30, 2017
Salt Life Acquisition
Promissory Note
Aug. 27, 2013
Salt Life Acquisition
Promissory Note, Maturity Date June 30, 2016
Promissory Note
Aug. 27, 2013
Salt Life Acquisition
Promissory Note, Maturity Date June 30, 2019
Promissory Note
Dec. 30, 2017
Letter of Credit
Line of Credit
Dec. 30, 2017
Revolving Credit Facility
Line of Credit
Debt Instrument [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
Maximum borrowing capacity
$ 10,000,000 
 
 
 
 
$ 15,000,000 
$ 2,000,000 
 
 
 
 
$ 25,000,000 
$ 145,000,000 
Potential maximum credit available under the facility
 
 
 
 
 
 
 
 
 
 
 
 
200,000,000 
Payment of deferred financing fees
 
 
 
 
(1,000,000)
 
 
 
 
 
 
 
 
Outstanding under credit facility
 
 
 
90,100,000 
 
 
 
 
 
 
 
 
 
Interest rate during period (percent)
 
 
 
 
 
 
 
 
 
 
 
 
3.30% 
Unused borrowing capacity
 
 
 
 
 
 
 
 
 
 
 
 
26,600,000 
Fixed charge coverage ratio, term (in months)
 
 
 
12 months 
 
 
 
 
 
 
 
 
 
Fixed charge coverage ratio
 
 
 
1.1 
 
 
 
 
 
 
 
 
 
Retained earnings, amount available for dividends and stock repurchases
 
9,000,000 
7,700,000 
 
 
 
 
 
 
 
 
 
 
Number of promissory notes issued (debt instruments)
 
 
 
 
 
 
 
 
 
 
 
 
Aggregate principal of promissory notes
 
 
 
 
 
 
 
22,000,000 
 
 
 
 
 
Amount of one-time installment payment
 
 
 
 
 
 
 
9,000,000 
 
 
 
 
 
Imputed interest (percent)
 
 
 
 
 
 
 
 
 
1.92% 
3.62% 
 
 
Debt instrument, discounted value
 
 
 
 
 
 
 
 
$ 3,900,000 
 
 
 
 
Selling, General and Administrative Expense (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Dec. 30, 2017
Dec. 31, 2016
Selling, General and Administrative Expense [Abstract]
 
 
Production and Distribution Costs
$ 3.9 
$ 3.5 
Stock-Based Compensation (Narrative) (Details) (USD $)
3 Months Ended
Dec. 30, 2017
Dec. 31, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
Allocated share-based compensation expense
$ 500,000 
$ 600,000 
Performance Shares
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
Vested in the period (shares)
92,068 
53,248 
Restricted Stock Units (RSUs)
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
Vested in the period (shares)
54,602 
8,438 
Stock issued (in shares)
72,138 
 
Number of shares payable in cash (in shares)
19,930 
 
2010 Stock Plan
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
Aggregate number of shares that may be delivered (shares)
500,000 
 
Total compensation cost not yet recognized
4,100,000 
 
Period for recognition
3 years 
 
Option Plan |
Stock Options
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
Allocated share-based compensation expense
$ 0 
$ 0 
Vest Upon Filing of 10-K for the Year Ending September 28, 2019
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
Vested in the period (shares)
55,750 
 
Purchase Contracts (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 30, 2017
Long-term Purchase Commitment [Line Items]
 
Outstanding minimum payments
$ 27,518 
Yarn
 
Long-term Purchase Commitment [Line Items]
 
Outstanding minimum payments
3,252 
Finished fabric
 
Long-term Purchase Commitment [Line Items]
 
Outstanding minimum payments
2,271 
Finished products
 
Long-term Purchase Commitment [Line Items]
 
Outstanding minimum payments
$ 21,995 
Business Segments (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Dec. 30, 2017
segment
Dec. 31, 2016
Sep. 30, 2017
Segment Reporting Information [Line Items]
 
 
 
Number of business segments
 
 
Net sales
$ 90,342 
$ 85,335 
 
Segment operating income (loss)
1,738 
469 
 
Reconciliation of Operating Profit (Loss) from Segments to Consolidated [Abstract]
 
 
 
Segment operating income
1,738 
469 
 
Unallocated corporate expenses
14,979 
17,311 
 
Unallocated interest expense
1,334 
1,301 
 
Income (loss) before provision for income taxes
404 
(832)
 
Segment assets
321,662 
 
317,802 
Operating Segments
 
 
 
Segment Reporting Information [Line Items]
 
 
 
Segment operating income (loss)
4,647 
3,684 
 
Reconciliation of Operating Profit (Loss) from Segments to Consolidated [Abstract]
 
 
 
Segment operating income
4,647 
3,684 
 
Operating Segments |
Basics
 
 
 
Segment Reporting Information [Line Items]
 
 
 
Net sales
73,176 
60,838 
 
Segment operating income (loss)
4,189 
4,684 
 
Reconciliation of Operating Profit (Loss) from Segments to Consolidated [Abstract]
 
 
 
Segment operating income
4,189 
4,684 
 
Operating Segments |
Branded
 
 
 
Segment Reporting Information [Line Items]
 
 
 
Net sales
17,166 
24,497 
 
Segment operating income (loss)
458 
(1,000)
 
Reconciliation of Operating Profit (Loss) from Segments to Consolidated [Abstract]
 
 
 
Segment operating income
458 
(1,000)
 
Corporate
 
 
 
Reconciliation of Operating Profit (Loss) from Segments to Consolidated [Abstract]
 
 
 
Unallocated corporate expenses
$ 2,909 
$ 3,215 
 
Income Taxes (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 30, 2017
Dec. 31, 2016
Sep. 30, 2017
Sep. 30, 2018
Minimum
Forecast
Sep. 30, 2018
Maximum
Forecast
Income Tax Contingency [Line Items]
 
 
 
 
 
Recognized provisional amount
$ 10.6 
 
 
 
 
Effective income tax rate reconciliation, excluding the rate change, percentage
46.40% 
 
 
 
 
Effective income tax rate (percent)
 
27.00% 
5.90% 
 
 
Effective income tax rate reconciliation, at federal statutory income tax rate, percent
24.30% 
 
 
12.00% 
13.00% 
Provisional amount of expense related to the remeasurement of deferred tax balance
1.1 
 
 
 
 
Provisional amount related to this one-time transition tax
$ 9.5 
 
 
 
 
Derivatives and Fair Value Measurements (Details) (USD $)
3 Months Ended
Dec. 30, 2017
Dec. 31, 2016
Dec. 30, 2017
Other assets
Sep. 30, 2017
Other assets
Dec. 30, 2017
Deferred tax assets
Sep. 30, 2017
Deferred tax assets
Dec. 30, 2017
Accrued expenses
Sep. 30, 2017
Accrued expenses
Dec. 30, 2017
Deferred tax liabilities
Sep. 30, 2017
Deferred tax liabilities
Dec. 30, 2017
Accumulated other comprehensive income (loss)
Sep. 30, 2017
Accumulated other comprehensive income (loss)
Dec. 30, 2017
July 19, 2019
Dec. 30, 2017
May 10, 2021
Dec. 30, 2017
Fair Value, Measurements, Recurring
Interest Rate Swaps
Sep. 30, 2017
Fair Value, Measurements, Recurring
Interest Rate Swaps
Dec. 30, 2017
Fair Value, Measurements, Recurring
Cotton Options
Sep. 30, 2017
Fair Value, Measurements, Recurring
Cotton Options
Dec. 30, 2017
Fair Value, Measurements, Recurring
Contingent Consideration
Sep. 30, 2017
Fair Value, Measurements, Recurring
Contingent Consideration
Dec. 30, 2017
Fair Value, Measurements, Recurring
Quoted Prices in Active Markets for Identical Assets (Level 1)
Interest Rate Swaps
Sep. 30, 2017
Fair Value, Measurements, Recurring
Quoted Prices in Active Markets for Identical Assets (Level 1)
Interest Rate Swaps
Dec. 30, 2017
Fair Value, Measurements, Recurring
Quoted Prices in Active Markets for Identical Assets (Level 1)
Cotton Options
Sep. 30, 2017
Fair Value, Measurements, Recurring
Quoted Prices in Active Markets for Identical Assets (Level 1)
Cotton Options
Dec. 30, 2017
Fair Value, Measurements, Recurring
Quoted Prices in Active Markets for Identical Assets (Level 1)
Contingent Consideration
Sep. 30, 2017
Fair Value, Measurements, Recurring
Quoted Prices in Active Markets for Identical Assets (Level 1)
Contingent Consideration
Dec. 30, 2017
Fair Value, Measurements, Recurring
Significant Other Observable Inputs (Level 2)
Interest Rate Swaps
Sep. 30, 2017
Fair Value, Measurements, Recurring
Significant Other Observable Inputs (Level 2)
Interest Rate Swaps
Dec. 30, 2017
Fair Value, Measurements, Recurring
Significant Other Observable Inputs (Level 2)
Cotton Options
Sep. 30, 2017
Fair Value, Measurements, Recurring
Significant Other Observable Inputs (Level 2)
Cotton Options
Dec. 30, 2017
Fair Value, Measurements, Recurring
Significant Other Observable Inputs (Level 2)
Contingent Consideration
Sep. 30, 2017
Fair Value, Measurements, Recurring
Significant Other Observable Inputs (Level 2)
Contingent Consideration
Dec. 30, 2017
Fair Value, Measurements, Recurring
Significant Unobservable Inputs (Level 3)
Interest Rate Swaps
Sep. 30, 2017
Fair Value, Measurements, Recurring
Significant Unobservable Inputs (Level 3)
Interest Rate Swaps
Dec. 30, 2017
Fair Value, Measurements, Recurring
Significant Unobservable Inputs (Level 3)
Cotton Options
Sep. 30, 2017
Fair Value, Measurements, Recurring
Significant Unobservable Inputs (Level 3)
Cotton Options
Dec. 30, 2017
Fair Value, Measurements, Recurring
Significant Unobservable Inputs (Level 3)
Contingent Consideration
Sep. 30, 2017
Fair Value, Measurements, Recurring
Significant Unobservable Inputs (Level 3)
Contingent Consideration
Interest Rate Derivatives [Abstract]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notational Amount
 
 
 
 
 
 
 
 
 
 
 
 
$ 10,000,000 
$ 10,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed LIBOR Rate (percentage)
 
 
 
 
 
 
 
 
 
 
 
 
1.74% 
1.99% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring Basis [Abstract]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial derivative liabilities, fair value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
83,000 
(56,000)
(1,000)
(125,000)
(1,300,000)
(1,600,000)
(1,000)
(125,000)
83,000 
(56,000)
(1,300,000)
(1,600,000)
Derivatives related to interest rate swap agreements
 
 
83,000 
21,000 
(56,000)
(32,000)
51,000 
(35,000)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accrued contingent consideration
1,300,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Decrease in accrual of contingent liability
$ 300,000 
$ 100,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Legal Proceedings (Details) (The Sports Authority Bankruptcy Litigation, USD $)
In Millions, unless otherwise specified
Dec. 30, 2017
Minimum
 
Loss Contingencies [Line Items]
 
Loss contingency, estimate of possible loss
$ 0 
Maximum
 
Loss Contingencies [Line Items]
 
Loss contingency, estimate of possible loss
$ 3.3 
Repurchase of Common Stock (Details) (USD $)
1 Months Ended 3 Months Ended
Dec. 30, 2017
Dec. 2, 2017
Nov. 4, 2017
Dec. 30, 2017
Class of Stock [Line Items]
 
 
 
 
Authorized amount
$ 50,000,000 
 
 
$ 50,000,000 
Shares repurchased (in shares)
 
 
 
145,124 
Stock repurchased during period, value
 
 
 
3,000,000 
Aggregated number of shares repurchased (in shares)
3,038,611 
 
 
3,038,611 
Aggregated shares repurchased, value
41,700,000 
 
 
41,700,000 
Dollar Value of Shares that May Yet Be Purchased Under the Plans
8,300,000 
 
 
8,300,000 
Common Stock
 
 
 
 
Class of Stock [Line Items]
 
 
 
 
Shares repurchased (in shares)
69,599 
46,444 
29,081 
145,124 
Average Price Paid per Share (usd per share)
$ 20.56 
$ 20.67 
$ 21.04 
$ 20.69 
Dollar Value of Shares that May Yet Be Purchased Under the Plans
$ 8,300,000 
$ 9,700,000 
$ 10,700,000 
$ 8,300,000 
Publicly Announced Plan |
Common Stock
 
 
 
 
Class of Stock [Line Items]
 
 
 
 
Shares repurchased (in shares)
69,599 
46,444 
29,081 
145,124 
Goodwill and Intangible Assets (Details) (USD $)
3 Months Ended 12 Months Ended
Dec. 30, 2017
Dec. 31, 2016
Oct. 1, 2011
Sep. 30, 2017
Goodwill and Finite-Lived Intangible Assets [Line Items]
 
 
 
 
Goodwill, Cost
$ 19,917,000 
 
 
$ 19,917,000 
Goodwill, Accumulated Amortization
 
 
Goodwill, Net Value
19,917,000 
 
 
19,917,000 
Intangibles, Cost
20,447,000 
 
 
20,447,000 
Intangibles, Accumulated Amortization
(4,522,000)
 
 
(4,296,000)
Intangibles, Net Value
15,925,000 
 
 
16,151,000 
Goodwill acquired
 
 
600,000 
 
Amortization of intangible assets
200,000 
300,000 
 
 
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract]
 
 
 
 
Amortization expense estimate for 2018
900,000 
 
 
 
Amortization expense estimate for 2019
900,000 
 
 
 
Amortization expense estimate for 2020
700,000 
 
 
 
Amortization expense estimate for 2021
600,000 
 
 
 
Amortization expense estimate for 2022
600,000 
 
 
 
Tradename/trademarks
 
 
 
 
Goodwill and Finite-Lived Intangible Assets [Line Items]
 
 
 
 
Intangibles, Cost
16,090,000 
 
 
16,090,000 
Intangibles, Accumulated Amortization
(2,329,000)
 
 
(2,193,000)
Intangibles, Net Value
13,761,000 
 
 
13,897,000 
Tradename/trademarks |
Minimum
 
 
 
 
Goodwill and Finite-Lived Intangible Assets [Line Items]
 
 
 
 
Intangibles, economic life
20 years 
 
 
 
Tradename/trademarks |
Maximum
 
 
 
 
Goodwill and Finite-Lived Intangible Assets [Line Items]
 
 
 
 
Intangibles, economic life
30 years 
 
 
 
Customer relationships
 
 
 
 
Goodwill and Finite-Lived Intangible Assets [Line Items]
 
 
 
 
Intangibles, economic life
20 years 
 
 
 
Technology
 
 
 
 
Goodwill and Finite-Lived Intangible Assets [Line Items]
 
 
 
 
Intangibles, Cost
1,220,000 
 
 
1,220,000 
Intangibles, Accumulated Amortization
(978,000)
 
 
(947,000)
Intangibles, Net Value
242,000 
 
 
273,000 
Intangibles, economic life
10 years 
 
 
 
License agreements
 
 
 
 
Goodwill and Finite-Lived Intangible Assets [Line Items]
 
 
 
 
Intangibles, Cost
2,100,000 
 
 
2,100,000 
Intangibles, Accumulated Amortization
(449,000)
 
 
(423,000)
Intangibles, Net Value
1,651,000 
 
 
1,677,000 
License agreements |
Minimum
 
 
 
 
Goodwill and Finite-Lived Intangible Assets [Line Items]
 
 
 
 
Intangibles, economic life
15 years 
 
 
 
License agreements |
Maximum
 
 
 
 
Goodwill and Finite-Lived Intangible Assets [Line Items]
 
 
 
 
Intangibles, economic life
30 years 
 
 
 
Non-compete agreements
 
 
 
 
Goodwill and Finite-Lived Intangible Assets [Line Items]
 
 
 
 
Intangibles, Cost
1,037,000 
 
 
1,037,000 
Intangibles, Accumulated Amortization
(766,000)
 
 
(733,000)
Intangibles, Net Value
$ 271,000 
 
 
$ 304,000 
Non-compete agreements |
Minimum
 
 
 
 
Goodwill and Finite-Lived Intangible Assets [Line Items]
 
 
 
 
Intangibles, economic life
4 years 
 
 
 
Non-compete agreements |
Maximum
 
 
 
 
Goodwill and Finite-Lived Intangible Assets [Line Items]
 
 
 
 
Intangibles, economic life
8 years 6 months