Annual report pursuant to Section 13 and 15(d)

Note 19 - Segment Information

v3.20.2
Note 19 - Segment Information
 12 Months Ended
Jun. 30, 2020
Notes to Financial Statements  
Segment Reporting Disclosure [Text Block]
(
19
)
Segment Information
 
Operating segments are defined as (i) components of an enterprise that engage in business activities from which they
may
earn revenue and incur expense, (ii) have operating results that are regularly reviewed by the enterprise's chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and (iii) for which discrete financial information is available. Our Chief Executive Officer is our chief operating decision maker (“CODM”) and reviews financial information at the operating segment level and is responsible for making decisions about resources allocated amongst the operating segments based on actual results. Our operating segments are aligned with how the Company, including our CODM, manages the business. As such, our reportable operating segments are the Wholesale segment and the Retail segment.
 
Our wholesale and retail operating segments represent strategic business areas of our vertically integrated enterprise that operate separately and provide their own distinctive services. This vertical structure enables us to offer our complete line of home furnishings and accents more effectively while controlling quality and cost. We evaluate performance of the respective segments based upon revenues and operating income. The accounting policies of the operating segments are the same as those described in Note 
3,
Summary of Significant Accounting Policies
. We account for intersegment revenue transactions between our segments consistent with independent
third
-party transactions, that is, at current market prices. As a result, the manufacturing profit related to sales to our retail segment is included within our wholesale segment. Operating income realized on intersegment revenue transactions is therefore generally consistent with the operating income realized on our revenue from independent
third
-party transactions. Segment operating income is based on profit or loss from operations before interest expense, interest income, other expense, net and income taxes. Sales are attributed to countries on the basis of the customer's location.
 
As of
June 30, 2020,
the Company operated
144
design centers (our retail segment) and our independent retailers operated
160
design centers. Our wholesale segment net sales include sales to our retail segment, which are eliminated in consolidation, and sales to our independent retailers and other
third
parties. Our retail segment net sales accounted for
78.5%
of our consolidated net sales in fiscal
2020.
Our wholesale segment net sales accounted for the remaining
21.5%.
Our
ten
largest customers were all within our wholesale segment and represent
15.4%
of our consolidated net sales in fiscal
2020.
These customers are the GSA and
nine
independent retailers.
 
Information for each of the last
three
fiscal years ended
June 30
is provided below (in thousands):
 
   
2020
    
2019
    
2018
  
Net sales
                        
Wholesale segment
   $
337,948
     $
441,551
     $
475,731
  
Retail segment
    
462,800
      
589,829
      
587,502
  
Elimination of intercompany sales
    
(210,911
 )    
(284,696
 )    
(296,449
 )
Consolidated Total
   $
589,837
     $
746,684
     $
766,784
  
                         
Income before income taxes
                        
Wholesale segment
   $
33,106
     $
42,481
     $
48,499
  
Retail segment
    
(21,414
 )    
(10,529
 )    
(1,738
 )
Adjustment of intercompany profit
(a)
    
2,952
      
1,995
      
2,106
  
Operating income
    
14,644
      
33,947
      
48,867
  
Interest (expense), net of interest income
    
(455
 )    
(87
 )    
200
  
Consolidated Total
   $
14,189
     $
33,860
     $
49,067
  
                         
Depreciation and amortization
                        
Wholesale segment
   $
7,107
     $
7,560
     $
7,752
  
Retail segment
    
9,752
      
11,970
      
12,079
  
Consolidated Total
   $
16,859
     $
19,530
     $
19,831
  
                         
Capital expenditures
                        
Wholesale segment
   $
7,454
     $
3,340
     $
4,286
  
Retail segment
    
8,255
      
5,780
      
8,200
  
Consolidated Total
   $
15,709
     $
9,120
     $
12,486
  
 
(a)
Represents the change in wholesale profit contained in the retail segment inventory at the end of the period.
 
   
June 30,
  
(in thousands)
  
2020
    
2019
    
2018
  
Total Assets
                        
Wholesale segment
   $
255,011
     $
237,354
     $
241,616
  
Retail segment
    
390,635
      
299,125
      
317,590
  
Inventory profit elimination
(a)
    
(22,857
 )    
(26,128
 )    
(28,773
 )
Consolidated Total
   $
622,789
     $
510,351
     $
530,433
  
 
(a)
Represents the wholesale profit contained in the retail segment inventory that has
not
yet been realized. These profits are realized when the related inventory is sold.
 
Geographic Information
 
Our international net sales are comprised of our wholesale segment sales to independent retailers and our retail segment sales to customers through our Company-operated design centers. The number of international design centers and the related net sales as a percentage of our consolidated net sales are shown in the following tables.
 
   
Fiscal Year Ended June 30,
  
   
2020
    
2019
    
2018
  
Independent retailer design centers
    
125
      
118
      
104
  
Company-operated design centers
    
6
      
6
      
6
  
Total international design centers
    
131
      
124
      
110
  
% of total design centers international
    
43.1
 %    
41.1
 %    
37.2
 %
% of consolidated net sales
    
5.7
 %    
6.8
 %    
10.2
 %
 
Sales by Country
  
2020
    
2019
    
2018
  
United States
    
94.3
 %    
93.2
 %    
89.8
 %
All Others
    
5.7
 %    
6.8
 %    
10.2
 %
 
The following table sets forth long-lived assets by geographic area at
June 30 (
in thousands):
 
   
2020
    
2019
    
2018
  
United States
   $
319,012
     $
218,034
     $
239,567
  
Mexico
    
14,474
      
18,144
      
18,323
  
Honduras
    
8,049
      
8,057
      
8,637
  
Canada
    
4,485
      
1,011
      
1,376
  
Total long-lived assets
(1)
   $
346,020
     $
245,246
     $
267,903
  
 
(
1
)
Long-lived assets consist of net property, plant and equipment and operating lease right-of-use assets and exclude goodwill, intangible assets, deferred income taxes and other assets.