SEGMENT INFORMATION

12 Months Ended

Apr. 28, 2019

21.	SEGMENT INFORMATION

Overall

Our operations are classified into

three

business segments: mattress fabrics, upholstery fabrics, and home accessories. The mattress fabrics segment manufactures, sources, and sells fabrics and mattress covers primarily to bedding manufacturers. The upholstery fabrics segment develops, manufactures, sources, and sells fabrics primarily to residential and commercial furniture manufacturers. The home accessories segment is our new finished products business that manufactures, sources, and sells bedding accessories and home goods directly to consumers and businesses through global e-commerce and business-to-business sales channels.

Effective April 1, 2018, we acquired Read (see Note 2 for further details), a turn-key provider of window treatments that offers the sourcing of upholstery fabrics and other products, measuring, and installation services of their own products for the hospitality and commercial industries. Read’s financial information is aggregated with our upholstery fabrics segment.

Effective June 22, 2018, we acquired an 80% ownership interest in eLuxury (see Note 2 for further details), a company that offers bedding accessories and home goods directly to consumers and businesses through its e-commerce platform. eLuxury’s financial information is included in our home accessories segment.

Net Sales Geographic Concentration

Net sales denominated in U.S. dollars accounted for 90%, 90% and 92% of total consolidated net sales in fiscal 2019, 2018, and 2017, respectively. International sales accounted for 24%, 23%, and 22% of net sales during fiscal 2019, 2018, and 2017, respectively, and are summarized by geographic area as follows:

(dollars in thousands)	2019		2018		2017
north america (excluding USA) (1)	$	29,247		27,844		29,995
far east and asia (2)		39,277		40,671		34,695
all other areas		3,712		5,681		3,618
	$	72,236		74,196		68,308

(1)	Of this amount, $22.5 million, $21.9 million, and $22.3 million are attributable to shipments to Mexico in fiscal 2019, 2018, and 2017, respectively.

(2)	Of this amount $29.8 million, $32.6 million, and $26.6 million are attributable to shipments to China in fiscal 2019, 2018, and 2017, respectively.

Sales are attributed to individual countries based upon location that the company ships its products to for delivery to customers.

Customer Concentration

One

customer within the upholstery fabrics segment represented 11%, 12%, and 11% of consolidated net sales in fiscal 2019, 2018 and 2017, respectively. No customers within the upholstery fabrics segment accounted for greater than 10% of the consolidated net accounts receivable balance as of April 28, 2019.

One

customer within the upholstery fabrics segment accounted for 13% of the consolidated net accounts receivable balance as of April 29, 2018.

No customers within the mattress fabrics segment represented greater than 10% of consolidated net sales during fiscal 2019.

One

customer within the mattress fabrics segment represented 13% of consolidated net sales during 2018, and 2017, respectively. No customers within the mattress fabrics segment accounted for greater than 10% of the consolidated net accounts receivable balance as of April 28, 2019. Two customers within the mattress fabrics segment accounted for 20% of the consolidated net accounts receivable balance as of April 29, 2018.

No customers within the home accessories segment represented greater than 10% of consolidated net sales during fiscal 2019. No customers within the home accessories segment accounted for greater than 10% of the consolidated net accounts receivable balance as of April 28, 2019.

Employee Workforce Concentration

The hourly employees at our manufacturing facility in Canada (approximately

% of our workforce) are represented by a local, unaffiliated union. The collective bargaining agreement for these employees expires on February 1, 2020. We are not aware of any efforts to organize any more of our employees, and we believe our relations with our employees are good.

Financial Information

We evaluate the operating performance of our segments based upon income from operations before certain unallocated corporate expenses, restructuring expense (credit) and related charges, and other non-recurring items. Cost of sales in all of our segments include costs to manufacture, develop, or source our products, including costs such as raw material and finished goods purchases, direct and indirect labor, overhead and incoming freight charges. Unallocated corporate expenses primarily represent compensation and benefits for certain executive officers, all costs related with being a public company, and other miscellaneous expenses. Segment assets include assets used in operations of each segment and primarily consist of accounts receivable, inventories, and property, plant, and equipment. The mattress fabrics segment also includes in segment assets their investment in an unconsolidated joint venture.

During fiscal 2019, we elected to no longer include goodwill and intangible assets in segment assets, as these assets are not used by the Chief Operating Decision Maker to evaluate the respective segment’s operating performance, to allocate resources to the individual segments, or determine executive compensation.

Statements of operations for the company’s operating segments are as follows:

(dollars in thousands)		2019		2018		2017
net sales:
upholstery fabrics	$	135,654		131,128		118,739
mattress fabrics		145,059		192,597		190,805
home accessories		15,956		—		—
	$	296,669		323,725		309,544
gross profit:
upholstery fabrics	$	25,374		25,836		26,170
mattress fabrics		22,904		38,797		43,065
home accessories		4,428		—		—
total segment gross profit		52,706		64,633		69,235
other non-recurring charges (1)		(159	)	—		—
restructuring related charges (2)		(2,349	)	—		—
total gross profit	$	50,198		64,633		69,235
selling, general, and administrative expenses:
upholstery fabrics	$	14,551		14,881		15,079
mattress fabrics		11,296		12,935		13,685
home accessories		5,163		—		—
unallocated corporate		6,837		9,356		10,393
total segment selling, general, and administrative expenses		37,847		37,172		39,157
other non-recurring charges (3)		518		—		—
restructuring related charges (4)		40		—		—
total selling, general, and administrative expenses	$	38,405		37,172		39,157
Income (loss) from operations:
upholstery fabrics	$	10,823		10,956		11,091
mattress fabrics		11,608		25,861		29,380
home accessories		(735	)	—		—
unallocated corporate expenses		(6,837	)	(9,356	)	(10,393	)
total segment income from operations		14,859		27,461		30,078
other non-recurring charges (1) (3)		(678	)	—		—
restructuring credit and related charges (5) (6)		(1,563	)	—		—
total income from operations		12,618		27,461		30,078
interest expense		(42	)	(94	)	—
interest income		766		534		299
other expense		(1,346	)	(1,018	)	(681	)
income before income taxes	$	11,996		26,883		29,696

(1)	The $159 represents employee termination benefits and other operational reorganization costs associated with our mattress fabrics segment.

(2)	The $2.3 million represents a restructuring related charge of $1.6 million for inventory markdowns and $784 for other operating costs associated with our closed Anderson, SC upholstery fabrics plant facility.

(3)

The $518 represents a non-recurring charge of $429 for the accelerated vesting of certain stock-based compensation agreements associated with a key executive and was recorded in unallocated corporate expenses. Additionally, the $518 includes $89 for employee termination benefits and operational reorganizational costs associated with our mattress fabrics segment.

(4)	The $40 represents a restructuring related charge for the accelerated vesting for certain stock-based compensation agreements associated with an employee that was located at our closed Anderson, SC upholstery fabrics plant facility.

(5)

The $1.6 million represent charges and credits that were associated our closed Anderson, SC upholstery fabrics plant facility and include $1.6 million for inventory markdowns, $784 for other operating costs, $661 for employee termination benefits, and $40 for the accelerated vesting of certain stock-based compensation agreements associated an employee, partially offset by a $1.5 million gain on the sale of property, plant, and equipment.

(6)	Of this total net charge, a charge of $2.3 million, a charge of $40, and a credit of $825 were recorded in cost of sales, selling, general, and administrative expenses, and restructuring credit, respectively, in the fiscal 2019 Consolidated Statement of Net Income.

Balance sheet information for the company’s operating segments follow:

(dollars in thousands)	April 28 2019			April 29, 2018
segment assets
mattress fabrics
accounts receivable	$	12,098			15,195
inventory		24,649			28,740
property, plant, and equipment		44,266	(1)		48,797	(2)
investment in unconsolidated joint venture		1,508			1,501
total mattress fabrics assets		82,521			94,233
upholstery fabrics
accounts receivable		11,274			11,112
inventory		22,915			24,714
property, plant, and equipment		1,795	(3)		2,445	(4)
total upholstery fabrics assets		35,984			38,271
home accessories
accounts receivable		379			—
inventory		3,296			—
property, plant, and equipment		1,910	(5)		—
total home accessories assets		5,585			—
total segment assets		124,090			132,504
non-segment assets
cash and cash equivalents		40,008			21,228
short-term investments – available for sale		—			2,451
short-term investments – held-to-maturity		5,001			25,759
current income taxes receivable		776			—
deferred income taxes		457			1,458
other current assets		2,849			2,870
property, plant, and equipment (6)		418			552
goodwill		27,222			13,569
intangible assets		10,448			4,275
long-term investments - held-to-maturity		—			5,035
long-term investments - rabbi trust		7,081			7,326
noncurrent income taxes receivable		733
other assets		643			957
total assets	$	219,726			217,984

(dollars in thousands)	2019		2018		2017
capital expenditures (7):
mattress fabrics	$	2,526		6,713		17,689
upholstery fabrics		382		488		822
home accessories		53		—		—
unallocated corporate		14		238		260
	$	2,975		7,439		18,771
depreciation expense
mattress fabrics	$	7,008		6,850		6,245
upholstery fabrics		787		822		840
home accessories		322		—		—
total segment depreciation expense	$	8,117		7,672		7,085

(1)	The $44.3 million at April 28, 2019, represents property, plant, and equipment located in the U.S. of $32.4 million and located in Canada of $11.9 million.

(2)	The $48.8 million at April 29, 2018, represents property, plant, and equipment located in the U.S. of $35.4 million and located in Canada of $13.4 million.

(3)	The $1.8 million at April 28, 2019, represents property, plant, and equipment located in the U.S. of $1.2 million and located in China of $591.

(4)	The $2.4 million at April 29, 2018, represents property, plant, and equipment located in the U.S. of $1.8 million and located in China of $661.

(5)	The $1.9 million at April 28, 2019, represents property, plant, and equipment located in the U.S.

(6)	The $418 and $552 at April 28, 2019, and April 29, 2018, represent property, plant, and equipment associated with unallocated corporate departments and corporate departments shared by both the mattress fabrics, upholstery fabrics, and home accessories segments located in the U.S.

(7)	Capital expenditure amounts are stated on an accrual basis. See the Consolidated Statement of Cash Flows for capital expenditure amounts on a cash basis.