Segment Reporting

6 Months Ended

Apr. 02, 2017

Segment Reporting [Abstract]

Segment Reporting

Note 3 - Segment Reporting

Optex Systems Holdings reportable segments are strategic businesses offering similar products to similar markets and customers; however the companies are operated and managed separately due to differences in manufacturing technology, equipment, geographic location, and specific product mix. Applied Optics Center was acquired as a unit, and the management at the time of the acquisition was retained.

The Applied Optics Center segment also serves as the key supplier of laser coated filters used in the production of periscope assemblies for the Optex Systems Richardson segment. Intersegment sales and transfers are accounted for at annually agreed to pricing rates based on estimated segment product cost, which includes segment direct manufacturing and general and administrative costs, but exclude profits that would apply to third party external customers.

Optex Systems – Richardson, serves as the home office for both segments and shared general and administrative costs attributable to both segments are allocated directly to the segments based on the government Cost Accounting Standard (CAS) 403 – “Allocation of Home Office Expenses to Segments”. The purpose of CAS 403 is to provide criteria for allocating home office expenses to the segments of an organization based on the beneficial or causal relationships between the expenses and the receiving segments. Based on CAS 403, Optex Systems Holdings allocates home office expenses based on a three factor formula which is the average of the following three percentages for each of the segments fiscal year:

(1) The percentage of segment payroll dollars to total payroll dollars of all segments;

(2) The percentage of the segment’s operating revenue to the total operating revenue of all segments

(3) The percentage of the average net book value of the sum of the segment’s tangible capital assets plus inventories to the total average net book value of such assets of all segments.

The financial table below presents the information for each of the reportable segments profit or loss as well as segment assets for each year. Optex Systems Holdings, Inc. does not allocate interest expense, income taxes or unusual items to segments.

	Reportable Segment Financial Information (thousands)
	Three months ended April 2, 2017
	Optex Systems Richardson			Applied Optics Center Dallas			Other (non allocated costs and intersegment eliminations)			Consolidated Total
Revenues from external customers	$	2,404		$	1,636		$	-		$	4,040
Intersegment revenues		-			431			(431	)		-
Total Revenue	$	2,404		$	2,067		$	(431	)	$	4,040
Interest expense		-			-			6			6
Depreciation and amortization		15			70			-			85
(Loss) before taxes		(2	)		(69	)		(78	)		(149	)
Other significant noncash items:
Allocated home office expense		(169	)		169			-			-
Loss on change in fair value of warrants		-			-			72			72
Stock compensation expense		65			-			-			65
Royalty expense amortization		8			-			-			8
Provision for (use of) contract loss reserves		-			-			-			-
Segment Assets		8,308			4,046			-			12,354
Expenditures for segment assets		-			-			-			-

	Reportable Segment Financial Information (thousands)
	Three months ended March 27, 2016
	Optex Systems Richardson			Applied Optics Center Dallas			Other (non allocated costs and intersegment eliminations)			Consolidated Total
Revenues from external customers	$	1,966		$	1,250		$	-		$	3,216
Intersegment revenues		-			437			(437	)		-
Total Revenue	$	1,966		$	1,687		$	(437	)	$	3,216
Interest (income)		-			-			(3	)		(3	)
Depreciation and amortization		18			68			-			86
Income (Loss) before taxes		(166	)		(147	)		3			(310	)
Other significant noncash items:
Allocated home office expense		(188	)		188			-			-
Stock option compensation expense		24			-			-			24
Royalty expense amortization		8			-			-			8
Use of contract loss reserves		-			(15	)		-			(15	)
Segment Assets		6,844			4,674			-			11,518
Expenditures for segment assets		-			(19	)		-			(19	)

	Reportable Segment Financial Information (thousands)
	Six months ending April 2, 2017
	Optex Systems Richardson			Applied Optics Center Dallas			Other (non allocated costs and intersegment eliminations)			Consolidated Total
Revenues from external customers	$	4,442		$	3,110		$	-		$	7,552
Intersegment revenues		-			893			(893	)		-
Total Revenue	$	4,442		$	4,003		$	(893	)	$	7,552
Interest expense	$	-		$	-		$	10		$	10
Depreciation and amortization	$	30		$	138		$	-		$	168
Income (Loss) before taxes	$	(43	)	$	(100	)	$	348		$	205
Other significant noncash items:
Allocated home office expense	$	(335	)	$	335		$	-		$	-
Gain on change in fair value of warrants	$	-		$	-		$	(358	)	$	(358	)
Stock compensation expense	$	129		$	-		$	-		$	129
Royalty expense amortization	$	15		$	-		$	-		$	15
Provision for (use of) contract loss reserves	$	-		$	-		$	-		$	-
Segment Assets	$	8,308		$	4,046		$	-		$	12,354
Expenditures for segment assets	$	(4	)	$	(126	)	$	-		$	(130	)

	Reportable Segment Financial Information (thousands)
	Six months ending March 27, 2016
	Optex Systems Richardson			Applied Optics Center Dallas			Other (non allocated costs and intersegment eliminations)			Consolidated Total
Revenues from external customers	$	4,134		$	2,295		$	-		$	6,429
Intersegment revenues		-			658			(658	)		-
Total Revenue	$	4,134		$	2,953		$	(658	)	$	6,429
Interest expense	$	-		$	-		$	15		$	15
Depreciation and amortization	$	37		$	135		$	-		$	172
(Loss) before taxes	$	(152	)	$	(389	)	$	(15	)	$	(556	)
Other significant noncash items:
Allocated home office expense	$	(376	)	$	376		$	-		$	-
Stock option compensation expense	$	48		$	-		$	-		$	48
Royalty expense amortization	$	15		$	-		$	-		$	15
Use of contract loss reserves	$	-		$	(30	)	$	-		$	(30	)
Segment Assets	$	6,844		$	4,674		$	-		$	11,518
Expenditures for segment assets	$	-		$	(19	)	$	-		$	(19	)