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Restructuring Activities | 3 Months Ended
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Jul. 28, 2024
Restructuring and Related Activities [Abstract] |
Restructuring Activities | 9. Restructuring Activities Mattress Fabrics Segment, Upholstery Fabrics Segment, and Unallocated Corporate Fiscal 2025 Restructuring Plan On April 29, 2024 (first quarter of fiscal 2025), our board of directors made a decision to (1) consolidate the company's North American mattress fabrics operations, including a gradual discontinuation of operations and sale of the company's manufacturing facility located in Quebec, Canada; (2) move a portion of the knitting and finishing capacity from the company's manufacturing facility located in Quebec, Canada to the company's manufacturing facility located in Stokesdale, NC; (3) transition the mattress fabrics segment's weaving operation to a strategic sourcing model through the company's long standing supply partners; (4) consolidate the company's two leased facilities related to the sewn mattress cover operation located in Ouanaminthe, Haiti, and reduce other operating expenses at this location; as well as (5) reduce unallocated corporate expenses and shared service expenses. We expect the gradual discontinuance of operations and the closure of the facility located in Quebec, Canada will be completed by December 31, 2024. The consolidation activity associated with the sewn mattress cover operation located in Haiti was completed during the first quarter of fiscal 2025. During fiscal 2025, these actions are expected to result in restructuring and restructuring related charges of approximately $5.1 million, of which approximately $3.0 million is expected to be cash expenditures. The $5.1 million of estimated restructuring and restructuring related charges represents approximately $5.0 million and $118,000 associated with the mattress fabrics and upholstery fabrics segments, respectively. The $5.0 million of estimated restructuring and restructuring related charges associated with our mattress fabrics segment represents (i) other associated costs of $1.7 million mostly related to relocating equipment from our facility in Quebec, Canada to our facility in Stokesdale, NC, (ii) additional depreciation expense related to the shortening of useful lives of equipment associated with the gradual discontinuance of our operations located in Canada noted above totaling $1.4 million, (ii) employee termination benefits of $1.2 million, (iii) lease termination costs of $531,000, (iv) writedowns and other inventory related adjustments of $116,000, (v) impairment charges and losses on the disposal of equipment totaling $95,000. These restructuring and restructuring related charges exclude any expected gain on the sale of real estate associated with the closure of the Canadian facility, the amount of which is currently undetermined but which will ultimately reduce the amount of the restructuring charges incurred. Based on management's internal analysis we expect cash proceeds from the sale of real estate (net of all taxes and commissions) to exceed the amount of restructuring charges incurred. Based on changes in business and current industry economic conditions, it is possible that the above estimates provided by management to determine restructuring and restructuring related charges incurred during fiscal 2025, and proceeds generated from the sale of the manufacturing facility located in Quebec, Canada, could be materially different from our actual results, and therefore could adversely affect the success of this restructuring plan. The following summarizes accrued restructuring costs for the three-month period ending July 28, 2024:
|  | Employee |  |  | Other |  |  |  |
|  | Termination |  |  | Associated |  |  |  |
(dollars in thousands) |  | Benefits |  |  | Costs |  |  | Total |
Beginning balance |  | $ | — |  |  | $ | — |  |  | $ | — |
Expenses incurred |  |  | 689 |  |  |  | 288 |  |  |  | 977 |
Change in estimate adjustments |  |  | — |  |  |  | — |  |  |  | — |
Payments |  |  | (72 | ) |  |  | (276 | ) |  |  | (348 | )
Foreign currency exchange remeasurement |  |  | (7 | ) |  |  | — |  |  |  | (7 | )
Ending balance |  | $ | 610 |  |  | $ | 12 |  |  | $ | 622 |
The following summarizes the restructuring and restructuring related charges for the three-month period ending July 28, 2024:
|  |  | Three Months Ended |
(dollars in thousands) |  |  | July 28, 2024 |
Additional depreciation expense for shortened useful lives of equipment |  |  | $ | 875 |
Employee termination benefits |  |  |  | 689 |
Lease termination costs |  |  |  | 670 |
Other Associated Costs |  |  |  | 288 |
Loss on disposal and markdowns of inventory |  |  |  | 116 |
Impairment and loss on disposal of equipment |  |  |  | 95 |
Restructuring expense and restructuring related charges (1) |  |  | $ | 2,733 |
(1) Of the total $2.7 million restructuring and restructuring related charges, $2.6 million and $116,000 were classified within restructuring expense and cost of sales, respectively, in the Consolidated Statement of Net Loss for the three-month period ending July 28, 2024. Of the total $2.7 million, $2.6 million and $118,000 relate to the mattress fabrics and upholstery fabrics segments, respectively. A summary of assets held for sale as of July 28, 2024 follows:
(dollars in thousands) |  |  | July 28, 2024 |
Equipment (1) |  |  | $ | 357 |
Right of use asset (2) |  |  |  | 250 |
Ending Balance |  |  | $ | 607 |
(1) In connection with the Fiscal 2025 Restructuring Plan noted above, equipment with a carrying value totaling $357,000 was classified as held for sale as of July 28, 2024. We determined that the fair value of this equipment exceeded its carrying value based on quoted market prices from dealers of this type of equipment. Therefore, no impairment charge was recorded during the first quarter of fiscal 2025. The carrying value of these assets held for sale are presented in the first quarter fiscal 2025 Consolidated Balance Sheet are are no longer being depreciated. (2) In connection with the Fiscal 2025 Restructuring Plan noted above, we entered into an agreement ("Termination Agreement") on August 2, 2024, to terminate a lease of a plant facility ("Right of Use Asset") located in Ouanaminthe, Haiti. Accordingly, as of July 28, 2024, we classified this Right of Use Asset as held for sale at its fair value of $250,000, which was lower than its carrying value totaling $656,000. Consequently, we recorded an impairment charge of $406,000 reflected as lease termination costs in the table above, that was classified within restructuring expense in our Consolidated Statement of Net Loss for the three-month period ending July 28, 2024. The fair value of this Right of Use Asset represents the amount due from the Lessor totaling $250,000, which is the amount stated in the Termination Agreement, and is expected to be paid no later than February 28, 2025. We believe the fair value amount of $250,000 as stated in the Termination Agreement, represents a significant observable input, and therefore this Right of Use Asset was classified as level two within the fair value hierarchy (see Note 11 for criteria for the classifications within the fair value hierarchy). Upholstery Fabrics Segment Shanghai, China Upholstery Fabrics Finishing Operation During the fourth quarter of fiscal 2024, we closed our upholstery fabrics finishing operation to align with current demand trends and will continue to leverage our strategic supply relationships to meet customer finishing needs in China. This restructuring activity was completed during the first quarter of fiscal 2025 and resulted in cumulative restructuring and restructuring related charges totaling $218,000. The following summarizes the activity in accrued restructuring costs for the three-month period ending July 28, 2024:
(dollars in thousands) | Total |
Beginning balance (1) | $ | 3 |
Expenses incurred (2) |  | 14 |
Payments |  | (6 | )
Ending balance (3) | $ | 11 |
(1) Accrued restructuring expense of $3,000 was reported within accrued expenses in the Consolidated Balance Sheet for the period ending April 28, 2024. (2) Expenses incurred represents other associated costs. (3) Accrued restructuring expense of $11,000 was reported within accrued restructuring in the Consolidated Balance Sheet for the period ending July 28, 2024. Ouanaminthe, Haiti Cut and Sew Upholstery Fabrics Operation During the third quarter of fiscal 2023, Culp Upholstery Fabrics Haiti, Ltd. ("CUF Haiti") entered into an agreement to terminate a lease associated with a facility, and in turn moved the production of upholstery cut and sewn kits to an existing facility leased by Culp Home Fashions Haiti, Ltd. ("CHF Haiti") during the fourth quarter of fiscal 2023. Both CUF Haiti and CHF Haiti are indirectly wholly-owned subsidiaries of the company. During the first quarter of fiscal 2024, demand for upholstery cut and sewn kits declined more than previously anticipated, resulting in the strategic action to discontinue the production of upholstery cut and sew kits in Haiti. The following summarizes our restructuring expense and restructuring related charges for the three months ending July 30, 2023:
|  |  | Three Months Ended |
(dollars in thousands) |  |  | July 30, 2023 |
Employee termination benefits |  |  | $ | 101 |
Impairment loss - equipment |  |  |  | 237 |
Loss on disposal and markdowns of inventory |  |  |  | 179 |
Restructuring expense and restructuring related charges (1) |  |  | $ | 517 |
(1) Of the total $517,000, $338,000 and $179,000 were recorded within restructuring expense and cost of sales, respectively, in the Consolidated Statement of Net Loss for the three-month period ending July 30, 2023. This restructuring activity was completed during the third quarter of fiscal 2024 and resulted in a cumulative restructuring and restructuring related charges of $1.3 million.

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- Definition The entire disclosure for restructuring and related activities. Description of restructuring activities such as exit and disposal activities, include facts and circumstances leading to the plan, the expected plan completion date, the major types of costs associated with the plan activities, total expected costs, the accrual balance at the end of the period, and the periods over which the remaining accrual will be settled. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 420 -SubTopic 10 -Name Accounting Standards Codification -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 5.P.4.e) -Publisher FASB -URI https://asc.fasb.org/1943274/2147479823/420-10-S99-2 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 420 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Subparagraph (b)(2) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482017/420-10-50-1 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 420 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482017/420-10-50-1 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 420 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/420/tableOfContent Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 420 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Subparagraph (e) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482017/420-10-50-1 + Details
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