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Segment Information
 9 Months Ended
Jan. 29, 2023
Segment Reporting [Abstract]  
Segment Information

12. Segment Information

Overall

Our operations are classified into two business segments: mattress fabrics and upholstery fabrics. 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. In addition, this segment includes Read, which provides window treatments and sourcing of upholstery fabrics and other products, as well as measuring and installation services for Read’s products, to customers in the hospitality and commercial industries. Read also supplies soft goods such as decorative top sheets, coverlets, duvet covers, bed skirts, bolsters, and pillows.

Financial Information

 

We evaluate the operating performance of our business segments based upon (loss) income from operations before certain unallocated corporate expenses and other items that are not expected to occur on a regular basis. Cost of sales for each segment includes costs to develop, manufacture, 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 executives and their support staff, all costs associated with being a public company, amortization of intangible assets, and other miscellaneous expenses. Segment assets include assets used in the operations of each segment and consist of accounts receivable, inventories, property, plant, and equipment, and right of use assets. Also, total assets related to our upholstery fabrics segment include a right of use asset classified as held for sale as of January 29, 2023. Intangible assets are not included in segment assets as these assets are not used by the Chief Operating Decision Maker to evaluate the respective segment’s operating performance, allocate resources to individual segments, or determine executive compensation.

 

Statements of operations for our operating segments are as follows:

 

 

 

Three months ended

 

 

 

January 29, 2023

 

 

January 30, 2022

 

net sales by segment:

 

 

 

 

 

 

mattress fabrics

 

$

24,697

 

 

$

38,439

 

upholstery fabrics

 

 

27,826

 

 

 

41,852

 

net sales

 

$

52,523

 

 

$

80,291

 

gross (loss) profit:

 

 

 

 

 

 

mattress fabrics

 

$

(1,237

)

 

$

3,164

 

upholstery fabrics

 

 

3,330

 

 

 

5,946

 

gross profit

 

$

2,093

 

 

$

9,110

 

selling, general, and administrative expenses by segment:

 

 

 

 

 

 

mattress fabrics

 

$

2,992

 

 

$

2,800

 

upholstery fabrics

 

 

3,750

 

 

 

3,500

 

unallocated corporate expenses

 

 

2,423

 

 

 

1,707

 

selling, general, and administrative expenses

 

$

9,165

 

 

$

8,007

 

(loss) income from operations by segment:

 

 

 

 

 

 

mattress fabrics

 

$

(4,229

)

 

$

364

 

upholstery fabrics

 

 

(420

)

 

 

2,446

 

unallocated corporate expenses

 

 

(2,423

)

 

 

(1,707

)

total segment (loss) income from operations

 

$

(7,072

)

 

$

1,103

 

     restructuring expense (1)

 

 

(711

)

 

 

—

 

(loss) income from operations

 

$

(7,783

)

 

$

1,103

 

interest income

 

 

196

 

 

 

214

 

other expense

 

 

(1,095

)

 

 

(322

)

(loss) income before income taxes

 

$

(8,682

)

 

$

995

 

 

 

(1) Restructuring expense of $711,000 for the three months ending January 29, 2023, represents lease termination costs of $434,000 and an impairment loss regarding leasehold improvements totaling $277,000 that related to the consolidation of certain leased facilities located in Ouanaminthe, Haiti.

 

 

 

 

Nine months ended

 

 

 

January 29, 2023

 

 

January 30, 2022

 

net sales by segment:

 

 

 

 

 

 

mattress fabrics

 

$

80,299

 

 

$

122,380

 

upholstery fabrics

 

 

93,209

 

 

 

115,519

 

net sales

 

$

173,508

 

 

$

237,899

 

gross (loss) profit:

 

 

 

 

 

 

mattress fabrics

 

$

(7,330

)

 

$

16,106

 

upholstery fabrics

 

 

11,436

 

 

 

16,230

 

total segment gross profit

 

$

4,106

 

 

$

32,336

 

     restructuring related charge (1)

 

 

(98

)

 

 

—

 

gross profit

 

$

4,008

 

 

$

32,336

 

selling, general, and administrative expenses by segment:

 

 

 

 

 

 

mattress fabrics

 

$

8,821

 

 

$

8,991

 

upholstery fabrics

 

 

11,053

 

 

 

10,491

 

unallocated corporate expenses

 

 

7,259

 

 

 

6,793

 

selling, general, and administrative expenses

 

$

27,133

 

 

$

26,275

 

(loss) income from operations by segment:

 

 

 

 

 

 

mattress fabrics

 

$

(16,151

)

 

$

7,115

 

upholstery fabrics

 

 

383

 

 

 

5,739

 

unallocated corporate expenses

 

 

(7,259

)

 

 

(6,793

)

total segment (loss) income from operations

 

$

(23,027

)

 

$

6,061

 

     restructuring expense (2)

 

 

(1,326

)

 

 

—

 

     restructuring related charge (1)

 

 

(98

)

 

 

—

 

(loss) income from operations

 

$

(24,451

)

 

$

6,061

 

interest income

 

 

292

 

 

 

347

 

other expense

 

 

(348

)

 

 

(963

)

(loss) income before income taxes

 

$

(24,507

)

 

$

5,445

 

 

 

(1) Restructuring related charge of $98,000 for the nine months ended January 29, 2023, represents a loss on disposal and markdowns of inventory related to the exit of our cut and sew upholstery fabrics operation located in Shanghai, China, which occurred during the second quarter of fiscal 2023. This $98,000 restructuring related charge was recorded in cost of sales in the Consolidated Statements of Net Loss for the nine months ending January 29, 2023.

 

(2) Restructuring expense of $1.3 million for the nine months ending January 29, 2023, relates to both our restructuring activities for our cut and sew upholstery fabrics operations located in Shanghai, China, which occurred during the second quarter of fiscal 2023, and located in Ouanaminthe, Haiti, which occurred during the third quarter of fiscal 2023. Restructuring expense consists of lease termination costs of $481,000, employee termination benefits of $468,000, impairment losses totaling $357,000 that relate to leasehold improvements and equipment, and $20,000 for other associated costs.

 

Balance sheet information for our operating segments follows:

 

(dollars in thousands)

 

January 29, 2023

 

 

January 30, 2022

 

 

May 1, 2022

 

Segment assets:

 

 

 

 

 

 

 

 

 

Mattress Fabrics:

 

 

 

 

 

 

 

 

 

Accounts receivable

 

$

8,314

 

 

$

17,617

 

 

$

9,865

 

Inventory

 

 

28,757

 

 

 

39,544

 

 

 

39,028

 

Property, plant and equipment (1)

 

 

34,661

 

 

 

39,913

 

 

 

38,731

 

Right of use assets (2)

 

 

2,476

 

 

 

3,706

 

 

 

3,469

 

Total mattress fabrics assets

 

 

74,208

 

 

 

100,780

 

 

 

91,093

 

Upholstery Fabrics:

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 

12,927

 

 

 

21,381

 

 

 

12,361

 

Inventory

 

 

18,870

 

 

 

33,589

 

 

 

27,529

 

Property, plant and equipment (3)

 

 

1,794

 

 

 

2,018

 

 

 

2,030

 

Right of use assets (4)

 

 

2,995

 

 

 

8,727

 

 

 

8,124

 

Assets held for sale (5)

 

 

1,950

 

 

 

—

 

 

 

—

 

Total upholstery fabrics assets

 

 

38,536

 

 

 

65,715

 

 

 

50,044

 

Total segment assets

 

 

112,744

 

 

 

166,495

 

 

 

141,137

 

Non-segment assets:

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

16,725

 

 

 

11,780

 

 

 

14,550

 

Short-term investments - available for sale

 

 

—

 

 

 

438

 

 

 

—

 

Short-term investments - held-to-maturity

 

 

—

 

 

 

1,315

 

 

 

—

 

Short-term investments - rabbi trust

 

 

2,420

 

 

 

—

 

 

 

—

 

Current income taxes receivable

 

 

238

 

 

 

367

 

 

 

857

 

Other current assets

 

 

2,839

 

 

 

4,419

 

 

 

2,986

 

Deferred income taxes

 

 

463

 

 

 

500

 

 

 

528

 

Property, plant and equipment (6)

 

 

737

 

 

 

847

 

 

 

941

 

Right of use assets (7)

 

 

3,442

 

 

 

4,162

 

 

 

3,984

 

Intangible assets

 

 

2,346

 

 

 

2,722

 

 

 

2,628

 

Long-term investments - rabbi trust

 

 

7,725

 

 

 

9,223

 

 

 

9,357

 

Long-term investments - held-to-maturity

 

 

—

 

 

 

8,677

 

 

 

—

 

Other assets

 

 

919

 

 

 

622

 

 

 

595

 

Total assets

 

$

150,598

 

 

$

211,567

 

 

$

177,563

 

 

 

 

 

Nine months ended

 

(dollars in thousands)

 

January 29, 2023

 

 

January 30, 2022

 

Capital expenditures (8):

 

 

 

 

 

 

Mattress Fabrics

 

$

612

 

 

$

2,828

 

Upholstery Fabrics

 

 

465

 

 

 

815

 

Unallocated Corporate

 

 

75

 

 

 

1,330

 

Total capital expenditures

 

$

1,152

 

 

$

4,973

 

Depreciation expense:

 

 

 

 

 

 

Mattress Fabrics

 

$

4,624

 

 

$

4,613

 

Upholstery Fabrics

 

 

604

 

 

 

590

 

Total depreciation expense

 

$

5,228

 

 

$

5,203

 
(1)
The $34.7 million as of January 29, 2023, represents property, plant, and equipment of $23.1 million, $10.9 million, and $651,000 located in the U.S., Canada, and Haiti, respectively. The $39.9 million as of January 30, 2022, represents property, plant, and equipment of $26.6 million, $12.5 million, and $796,000 located in the U.S., Canada, and Haiti, respectively. The $38.7 million as of May 1, 2022, represents property, plant, and equipment of $25.6 million, $12.4 million, and $757,000 located in the U.S., Canada, and Haiti, respectively.
(2)
The $2.5 million as of January 29, 2023, represents right of use assets of $1.6 million and $833,000 located in Haiti and Canada, respectively. The $3.7 million as of January 30, 2022, represents right of use assets of $2.1 million, $1.3 million, and $352,000 located in Haiti, the U.S., and Canada, respectively. The $3.5 million as of May 1, 2022, represents right of use assets of $2.0 million, $1.2 million, and $291,000 located in Haiti, the U.S., and Canada, respectively.
(3)
The $1.8 million as of January 29, 2023, represents property, plant, and equipment of $1.0 million, $630,000, and $121,000 located in the U.S., Haiti, and China, respectively. The $2.0 million as of January 30, 2022, represents property, plant, and equipment of $1.1 million, $585,000, and $344,000 located in the U.S., Haiti, and China, respectively. The $2.0 million as of May 1, 2022, represents property, plant, and equipment of $1.0 million, $756,000, and $255,000 located in the U.S., Haiti, and China, respectively.
(4)
The $3.0 million as of January 29, 2023, represents right of use assets of $1.7 million and $1.3 million located in China and the U.S., respectively. The $8.7 million as of January 30, 2022, represents right of use assets of $4.1 million, $2.7 million, and $1.9 million located in China, Haiti, and the U.S., respectively. The $8.1 million as of May 1, 2022, represents right of use assets of $3.7 million, $2.6 million, and $1.8 million located in China, Haiti, and the U.S., respectively.
(5)
The $2.0 million as of January 29, 2023, represents a right of use asset classified as held for sale located in Haiti.
(6)
The $737,000, $847,000, and $941,000 as of January 29, 2023, January 30, 2022, and May 1, 2022, respectively, represent property, plant, and equipment associated with unallocated corporate departments and corporate departments shared by our mattress fabrics and upholstery fabrics segments. Property, plant, and equipment associated with our corporate departments reside in the U.S.
(7)
The $3.4 million, $4.2 million, and $4.0 million as of January 29, 2023, January 30, 2022, and May 1, 2022, respectively, represent right of use assets located in the U.S.
(8)
Capital expenditure amounts are stated on the accrual basis. See Consolidated Statements of Cash Flows for capital expenditure amounts on a cash basis.