18. Segment Information

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 manufactures, sources, develops, 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 3 for further details), a turn key provider of window treatments that offer 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 fabric segment.

Effective June 22, 2018, we acquired an initial 80% ownership in eLuxury (see Note 3 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.

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 associated with being a public company, and other miscellaneous expenses. Segment assets include assets used in the 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.

Financial information for the company’s operating segments follows:


	Three months ended
	January 27, 2019			January 28, 2018
Net sales:
Mattress Fabrics	$	35,732		$	49,042
Upholstery Fabrics		37,104			36,268
Home Accessories		4,390			—

	$	77,226		$	85,310

Gross profit:
Mattress Fabrics	$	5,963		$	10,146
Upholstery Fabrics		7,624			7,457
Home Accessories		1,050			—

Total segment gross profit	$	14,637		$	17,603
Restructuring related charges (1)		(514	)		—

	$	14,123		$	17,603

Selling, general, and administrative expenses
Mattress Fabrics	$	2,755		$	3,309
Upholstery Fabrics		3,825			3,947
Home Accessories		1,361			—
Unallocated corporate expenses		1,628			2,703

Total segment selling, general, and administrative expenses		9,569			9,959
Other non-recurring charges (2)		429			—
Restructuring related charges (2)		40			—

	$	10,038		$	9,959

Income (loss) from operations:
Mattress Fabrics	$	3,208		$	6,837
Upholstery Fabrics		3,799			3,510
Home Accessories		(311	)		—
Unallocated corporate expenses		(1,628	)		(2,703	)

Total segment income from operations		5,068			7,644
Other non-recurring charges (2)		(429	)		—
Restructuring credit and related charges (2) (3)		(340	)		—

Total income from operations		4,299			7,644
Interest expense		—			(31	)
Interest income		251			132
Other expense		(288	)		(229	)

Income before income taxes	$	4,262		$	7,516

(1)	The $514 represents a restructuring related charge for other operating costs associated with our closed upholstery fabrics plant facility located in Anderson, SC.

(2)	Amounts represent non-recurring charges associated with accelerated vesting of certain stock-based compensation agreements. The $429 and $40 pertain to unallocated corporate expenses and a restructuring related charge associated with our closed Anderson, SC upholstery fabrics plant facility.

(3)

The $340 represents restructuring related charges totaling $554 noted in notes 1 and 2 above, partially offset by a restructuring credit of $214. The $214 restructuring credit represents a $362 gain on the sale of the building and land associated with our Anderson, SC upholstery fabrics plant facility, partially offset by a charge of $148 for employee termination benefits.


	Nine months ended
	January 27, 2019			January 28, 2018
Net sales:
Mattress Fabrics	$	107,335		$	146,072
Upholstery Fabrics		106,611			99,469
Home Accessories		11,759			—

	$	225,705		$	245,541

Gross profit:
Mattress Fabrics	$	17,050		$	29,641
Upholstery Fabrics		20,031			20,232
Home Accessories		3,435			—

Total segment gross profit	$	40,516		$	49,873
Other non-recurring charges (4)		(159	)		—
Restructuring related charges (5)		(2,349	)		—

	$	38,008		$	49,873

Selling, general, and administrative expenses
Mattress Fabrics	$	8,141		$	9,868
Upholstery Fabrics		10,985			11,458
Home Accessories		3,690			—
Unallocated corporate expenses		4,800			7,550

Total segment selling, general, and administrative expenses		27,616			28,876
Other non-recurring charges (6)		518			—
Restructuring related charges (2)		40			—

	$	28,174		$	28,876

Income (loss) from operations:
Mattress Fabrics	$	8,910		$	19,774
Upholstery Fabrics		9,044			8,773
Home Accessories		(254	)		—
Unallocated corporate expenses		(4,800	)		(7,550	)

Total segment income from operations		12,900			20,997
Other non-recurring charges (4) (6)		(678	)		—
Restructuring credit and related charges (7)		(1,563	)		—

Total income from operations		10,659			20,997
Interest expense		(38	)		(69	)
Interest income		552			391
Other expense		(688	)		(903	)

Income before income taxes	$	10,485		$	20,416

(4)	The $159 represents a non-recurring charge regarding employee termination benefits and other operational reorganization costs associated with our mattress fabrics segment.

(5)	The $2.4 million consists of a restructuring related charges of $1.6 million for inventory markdowns and $784 for other operating costs associated with our closed upholstery fabrics plant facility located in Anderson, SC.

(6)	The $518 represents non-recurring charges of $429 for accelerated vesting of certain stock-based compensation agreements associated with unallocated corporate expenses and $89 for employee termination benefits and operational reorganization costs associated with our mattress fabrics segment.

(7)

The $1.6 million represents restructuring related charges totaling $2.4 million noted in notes 2 and 5 above, partially offset by a restructuring credit of $825. The $825 restructuring credit represents a $1.5 million gain on the sale of property, plant, and equipment associated with our Anderson, SC upholstery fabrics plant facility, partially offset by a charge of $661 for employee termination benefits.

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


(dollars in thousands)	January 27, 2019		January 28, 2018		April 29, 2018
Segment assets:
Mattress Fabrics
Accounts receivable	$	12,373	$	12,840	$	15,195
Inventory		26,243		29,355		28,740
Property, plant and equipment (1)		45,845		49,289		48,797
Investment in unconsolidated joint venture		1,512		1,518		1,501

Total mattress fabrics assets		85,973		93,002		94,233

Upholstery Fabrics
Accounts receivable		13,367		13,257		11,112
Inventory		26,067		26,296		24,714
Property, plant and equipment (2)		1,957		2,101		2,445

Total upholstery fabrics assets		41,391		41,654		38,271

Home Accessories
Accounts receivable		402		—		—
Inventory		3,105		—		—
Property, plant and equipment (3)		1,985		—		—

Total home accessories assets		5,492		—		—

Total segment assets		132,856		134,656		132,504
Non-segment assets:
Cash and cash equivalents		26,418		22,428		21,228
Short-term investments (Available for Sale)		—		2,472		2,451
Short-term investments (Held-to-Maturity)		13,544		17,206		25,759
Other current assets		2,954		3,114		2,870
Deferred income taxes		3,224		1,942		1,458
Property, plant and equipment (4)		342		448		552
Goodwill		27,222		11,462		13,569
Intangible assets		10,542		1,397		4,275
Long-term investments (Held-to-Maturity)		—		13,625		5,035
Long-term investments (Rabbi Trust)		6,834		7,176		7,326
Other assets		972		918		957

Total assets	$	224,908	$	216,844	$	217,984


	Nine months ended
(dollars in thousands)	January 27, 2019		January 28, 2018
Capital expenditures (5):
Mattress Fabrics	$	2,342	$	5,445
Upholstery Fabrics		294		379
Home Accessories		33		—
Unallocated Corporate		11		47

Total capital expenditures	$	2,680	$	5,871

Depreciation expense:
Mattress Fabrics	$	5,265	$	5,068
Upholstery Fabrics		595		611
Home Accessories		227		—

Total depreciation expense	$	6,087	$	5,679

(1)

The $45.8 million at January 27, 2019, represents property, plant, and equipment of $33.5 million and $12.3 million located in the U.S. and Canada, respectively. The $49.3 million at January 28, 2018, represents property, plant, and equipment of $35.6 million and $13.7 million located in the U.S. and Canada, respectively. The $48.8 million at April 29, 2018, represents property, plant, and equipment of $35.4 million and $13.4 million located in the U.S. and Canada, respectively.

(2)

The $2.0 million at January 27, 2019, represents property, plant, and equipment of $1.3 million and $615 located in the U.S. and China, respectively. The $2.1 million at January 28, 2018, represents property, plant, and equipment of $1.4 million and $711 located in the U.S. and China, respectively. The $2.4 million at April 29, 2018, represents property, plant, and equipment of $1.8 million and $661 located in the U.S. and China, respectively.

(3)	The $2.0 million at January 27, 2019, represents property, plant and equipment located in the U.S.

(4)

The $342, $448, and $552 at January 27, 2019, January 28, 2018, and April 29, 2018, respectively, represent property, plant, and equipment associated with unallocated corporate departments and corporate departments shared by our mattress fabrics, upholstery fabrics, and home accessories segments. Property, plant, and equipment associated with corporate are located in the U.S.

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