Business Segment and Geographic Information

6 Months Ended

Jun. 27, 2014

Business Segment and Geographic Information

13. Business Segment and Geographic Information

The “management approach” has been used to present the following segment information. This approach is based upon the way the management of the Company organizes segments within an enterprise for making operating decisions and assessing performance. Financial information is reported on the basis that it is used internally by the chief operating decision maker (the “CODM”) for evaluating segment performance and deciding how to allocate resources to segments. The Company’s chief executive officer has been identified as the CODM.

The Company has two operating segments and reportable segments, which are presented below:

•

Direct-to-Consumer Services consist of sales of products and equipment rental income from the Company’s Home and Office Delivery (“HOD”) bottled water services, OCS and filtration services. The Company sells bottled water, brewed beverages and ancillary products, and rents water dispensers, brewed beverage equipment and filtration equipment to residential and commercial customers. Direct-to-Consumer Services are provided through the Company’s national network of sales and distribution facilities, vehicles and routes.

•

Retail Services consist of sales of the Company’s nonreturnable branded and private label one- and two- and a half-gallon high-density polyethylene (“HDPE”) bottles, as well as branded polyethylene terephthalate (“PET”) bottles, to major retailers. These products are distributed to retailers in all 50 states.

These operating segments were determined based on the nature of our sales channels. The measures that are used to assess the reportable segment’s operating performance are revenues and gross profit (excluding depreciation expense). A measure of assets is not applicable, as segment assets are not regularly reviewed by the CODM for evaluating performance or allocating resources. The table below presents information about the Company’s reportable segments for Quarter Successor 2014 and Quarter Predecessor 2013:


	Quarter Successor 2014		Quarter Predecessor 2013
Net revenue
Direct-to-Consumer Services	$	216,149	$	204,437
Retail Services		35,239		31,327

Total net revenue		251,388		235,764

Gross profit (excluding depreciation expense)
Direct-to-Consumer Services		163,686		155,009
Retail Services		1,412		2,649

Total reportable segment profit (excluding depreciation expense)		165,098		157,658

Expenses not allocated to the reportable segments		164,646		152,611

Income before income taxes	$	452	$	5,047

The table below presents information about the Company’s reportable segments for Year to Date Successor 2014 and Year to Date Predecessor 2013:


	Year to Date Successor 2014			Year to Date Predecessor 2013
Net revenue
Direct-to-Consumer Services	$	414,284		$	394,547
Retail Services		67,630			63,716

Total net revenue		481,914			458,263

Gross profit (excluding depreciation expense)
Direct-to-Consumer Services		311,902			297,541
Retail Services		3,468			6,208

Total reportable segment profit (excluding depreciation expense)		315,370			303,749

Expenses not allocated to the reportable segments		329,430			301,540

Income (loss) before income taxes	$	(14,060	)	$	2,209

Expenses not specifically related to the reportable segments are shown separately in the above reconciliation to consolidated income (loss) before income taxes. Expenses not allocated to the reportable segments are comprised of freight charges, variable manufacturing costs, depreciation & amortization, compensation, other corporate support related costs, interest expense and other, net costs.

No customer represented more than 10% of the Company’s total revenues during Quarter Successor 2014, Quarter Predecessor 2013, Year to Date Successor 2014 and Year to Date Predecessor 2013. The Company does not earn revenues or have long-lived assets located in foreign countries. In accordance with GAAP enterprise-wide disclosure requirements, the Company’s net revenues from external customers by main product lines are as follows:


	Quarter Successor 2014		Quarter Predecessor 2013		% Change
Returnable (5G/3G)	$	113,317	$	103,763		9.2	%
Small pack (PET/HDPE)		56,244		52,130		7.9
Coffee & break room supplies		39,205		39,767		(1.4	)
Filtration		6,111		5,561		9.9
Rental equipment (water dispensers/brewers)		19,354		19,143		1.1
Other		17,157		15,400		11.4

	$	251,388	$	235,764		6.6	%


	Year to Date Successor 2014		Year to Date Predecessor 2013		% Change
Returnable (5G/3G)	$	213,766	$	195,055		9.6	%
Small pack (PET/HDPE)		105,659		100,229		5.4
Coffee & break room supplies		79,621		80,931		(1.6	)
Filtration		12,150		11,004		10.4
Rental equipment (water dispensers/brewers)		38,720		38,014		1.9
Other		31,998		33,030		(3.1	)

	$	481,914	$	458,263		5.2	%

The Company recognizes rental income on filtration, brewers and dispensing equipment at customer locations based on the terms of the related operating leases, which are generally on a 28-day period. Amounts billed to customers for rental in future periods are deferred and included in Accrued expenses and other current liabilities on the Unaudited Condensed Consolidated Balance Sheets. Most revenues from product sales and rentals are made on credit without collateral. Total rental income for Quarter Successor 2014 and Quarter Predecessor 2013 was $24,935 and $24,365, respectively. This consists of water dispenser rental income of $19,354 and $19,143 for Quarter Successor 2014 and Quarter Predecessor 2013, respectively, as well as filtration rental income of $5,581 and $5,222 for Quarter Successor 2014 and Quarter Predecessor 2013, respectively. Total filtration income consists of filtration rental income, as noted above, as well as filtration other income of $530 and $339 for Quarter Successor 2014 and Quarter Predecessor 2013, respectively. Total rental income for Year to Date Successor 2014 and Year to Date Predecessor 2013 was $49,888 and $48,359, respectively. This consists of water dispenser rental income of $38,720 and $38,014 for Year to Date Successor 2014 and Year to Date Predecessor 2013, respectively, as well as filtration rental income of $11,168 and $10,345 for Year to Date Successor 2014 and Year to Date Predecessor 2013, respectively. Total filtration income consists of filtration rental income, as noted above, as well as filtration other income of $982 and $659 for Year to Date Successor 2014 and Year to Date Predecessor 2013, respectively.

The Company’s Other revenues from external customers included energy surcharge fees, finance fees and the sale of three- and five-gallon polycarbonate bottles.

- Definition

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

+ References

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+ Details

DS Services Holdings, Inc. 10-Q/A