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SEGMENT REPORTING
 3 Months Ended
May 04, 2014
SEGMENT REPORTING

NOTE D. SEGMENT REPORTING

We have two reportable segments, direct-to-customer and retail. The direct-to-customer segment has seven merchandising concepts (Williams-Sonoma, Pottery Barn, Pottery Barn Kids, PBteen, West Elm, Rejuvenation and Mark and Graham) which sell our products through our e-commerce websites and direct-mail catalogs. Our direct-to-customer merchandising concepts are operating segments, which have been aggregated into one reportable segment, direct-to-customer. The retail segment has five merchandising concepts (Williams-Sonoma, Pottery Barn, Pottery Barn Kids, West Elm and Rejuvenation) which sell our products through our retail stores. Our retail merchandising concepts are operating segments, which have been aggregated into one reportable segment, retail. Management’s expectation is that the overall economic characteristics of each of our operating segments will be similar over time based on management’s judgment that the operating segments have had similar historical economic characteristics and are expected to have similar long-term financial performance in the future.

These reportable segments are strategic business units that offer similar home-centered products. They are managed separately because the business units utilize two distinct distribution and marketing strategies. Based on management’s best estimate, our operating segments include allocations of certain expenses, including advertising and employment costs, to the extent they have been determined to benefit both channels. These operating segments are aggregated at the channel level for reporting purposes due to the fact that our brands are interdependent for economies of scale and we do not maintain fully allocated income statements at the brand level. As a result, material financial decisions related to the brands are made at the channel level. Furthermore, it is not practicable for us to report revenue by product group.

We use operating income to evaluate segment profitability. Operating income is defined as earnings (loss) before net interest income or expense and income taxes. Unallocated costs before interest and income taxes include corporate employee-related costs, occupancy expenses (including depreciation expense), administrative costs and third-party service costs, primarily in our corporate administrative and systems departments. Unallocated assets include corporate cash and cash equivalents, deferred income taxes, the net book value of corporate facilities and related information systems, and other corporate long-lived assets.

Income tax information by reportable segment has not been included as income taxes are calculated at a company-wide level and are not allocated to each reportable segment.

Segment Information

 

Dollars in thousands   

Direct-to-

Customer

      Retail      Unallocated     Total  

Thirteen weeks ended May 4, 2014

           

Net revenues1

    $ 491,289       $ 483,041       $ 0      $ 974,330   

Depreciation and amortization expense

      7,407         19,360         11,863        38,630   

Operating income (loss)

      121,136         30,196         (77,006 )      74,326   

Assets2

      547,077         988,659         632,364        2,168,100   

Capital expenditures

      9,477         14,700         13,942        38,119   

Thirteen weeks ended May 5, 2013

           

Net revenues1

    $ 419,084       $ 468,724       $ 0      $ 887,808   

Depreciation and amortization expense

      6,826         19,217         10,566        36,609   

Operating income (loss)

      95,941         34,016         (66,174 )      63,783   

Assets2

      417,409         905,378         740,432        2,063,219   

Capital expenditures

      9,706         20,722         17,016        47,444   

 

1 Includes net revenues of approximately $51.1 million and $48.1 million for the thirteen weeks ended May 4, 2014 and May 5, 2013, respectively, related to our foreign operations.
2 Includes approximately $59.8 million and $54.5 million of long-term assets as of May 4, 2014 and May 5, 2013, respectively, related to our foreign operations.