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Segment Information
 3 Months Ended
Jul. 28, 2024
Segment Reporting [Abstract]  
Segment Information

13. Segment Information

Overall

Our operations are classified into two business segments: mattress fabrics and upholstery fabrics.

Mattress Fabrics

The mattress fabrics segment manufactures, sources, and sells fabrics and mattress covers primarily to bedding manufacturers.

Upholstery Fabrics

The upholstery fabrics segment develops, manufactures, sources, and sells fabrics to customers in the residential, commercial, and hospitality industries. 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. The mattress fabrics segment also includes assets held for sale associated with a right of use asset and equipment related to the fiscal 2025 restructuring plan announced on April 29, 2024 (see Note 9 to the consolidated financial statements for further details regarding this restructuring plan). 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

 

 

 

July 28, 2024

 

 

July 30, 2023

 

Net sales by segment:

 

 

 

 

 

 

Mattress fabrics

 

$

28,076

 

 

$

29,222

 

Upholstery fabrics

 

 

28,461

 

 

 

27,440

 

Net sales

 

$

56,537

 

 

$

56,662

 

Gross (loss) profit:

 

 

 

 

 

 

Mattress fabrics

 

$

(326

)

 

$

1,994

 

Upholstery fabrics

 

 

5,518

 

 

 

5,270

 

Segment gross profit

 

 

5,192

 

 

 

7,264

 

Restructuring related charge (1) (3)

 

 

(116

)

 

 

(179

)

Gross profit

 

$

5,076

 

 

$

7,085

 

Selling, general, and administrative expenses by segment:

 

 

 

 

 

 

Mattress fabrics

 

$

3,223

 

 

$

3,393

 

Upholstery fabrics

 

 

3,806

 

 

 

3,941

 

Unallocated corporate expenses

 

 

2,267

 

 

 

2,495

 

Selling, general, and administrative expenses

 

$

9,296

 

 

$

9,829

 

(Loss) income from operations by segment:

 

 

 

 

 

 

Mattress fabrics

 

$

(3,549

)

 

$

(1,398

)

Upholstery fabrics

 

 

1,712

 

 

 

1,328

 

Unallocated corporate expenses

 

 

(2,267

)

 

 

(2,495

)

Total segment loss from operations

 

$

(4,104

)

 

$

(2,565

)

     Restructuring related charge (1) (3)

 

 

(116

)

 

 

(179

)

     Restructuring expense (2) (4)

 

 

(2,631

)

 

 

(338

)

Loss from operations

 

$

(6,851

)

 

$

(3,082

)

      Interest expense

 

 

(28

)

 

 

—

 

Interest income

 

 

262

 

 

 

345

 

Other (expense) income

 

 

(404

)

 

 

96

 

Loss before income taxes

 

$

(7,021

)

 

$

(2,641

)

 

(1) During the three-month period ending July 28, 2024, gross profit included a restructuring related charge totaling $116,000 for losses on the disposal of obsolete inventory related to the gradual discontinuation of operations at our manufacturing facility located in Quebec, Canada.

 

(2) During the three-month period ending July 28, 2024, restructuring expense of $2.6 million represents $2.5 million and $132,000, related to the mattress fabrics and upholstery fabrics segments, respectively. The $2.6 million represents (i) $1.9 million related to the gradual discontinuation of operations and the process of selling the manufacturing facility located in Quebec, Canada, which includes $875,000 of additional depreciation related to the shortening of useful lives of equipment, employee termination benefits of $539,000, lease termination costs of $264,000, impairment charges and losses on the disposal of equipment totaling $95,000, and other associated costs of $90,000; (ii) $470,0000 related to the consolidation of two leased facilities at our mattress cover operation located in Ouanaminthe, Haiti, which includes lease termination costs of $406,000, employee termination benefits of $48,000, and other associated costs of $16,000; (iii) $167,000 of other associated costs related to the relocation of certain equipment from the mattress fabrics manufacturing facility located in Quebec, Canada to the U.S. facility located in Stokesdale, N.C; (iv) $132,000 related to reducing costs within our upholstery fabrics segment which includes employee termination benefits of $102,000 and other associated costs from our U.S. and China operations of $30,000.

 

(3) During the three-month period ending July 30, 2023, gross profit included a restructuring related charge totaling $179,000 for markdowns of inventory related to the discontinuation of production of cut and sewn upholstery kits at the company's facility located in Ouanaminthe, Haiti.

 

(4) During the three-month period ending July 30, 2023, restructuring expense of $338,000 represents an impairment charge of $237,000 related mostly to machinery and equipment and $101,000 of employee termination benefits related to the discontinuation of production of cut and sewn upholstery kits at the company's facility located in Ouanaminthe, Haiti.

 

 

Balance sheet information for our operating segments follows:

 

(dollars in thousands)

 

July 28, 2024

 

 

July 30, 2023

 

 

April 28, 2024

 

Segment assets:

 

 

 

 

 

 

 

 

 

Mattress Fabrics:

 

 

 

 

 

 

 

 

 

Accounts receivable

 

$

10,094

 

 

$

11,058

 

 

$

10,003

 

Inventory

 

 

25,278

 

 

 

24,579

 

 

 

27,671

 

Property, plant and equipment (5)

 

 

28,844

 

 

 

32,792

 

 

 

31,472

 

Right of use assets (6)

 

 

568

 

 

 

2,139

 

 

 

1,627

 

Assets held for sale

 

 

607

 

 

 

—

 

 

 

—

 

Total mattress fabrics assets

 

 

65,391

 

 

 

70,568

 

 

 

70,773

 

Upholstery Fabrics:

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 

11,493

 

 

 

11,554

 

 

 

11,135

 

Inventory

 

 

16,390

 

 

 

19,238

 

 

 

17,172

 

Property, plant and equipment (7)

 

 

1,098

 

 

 

1,491

 

 

 

1,125

 

Right of use assets (8)

 

 

1,478

 

 

 

2,237

 

 

 

1,952

 

Total upholstery fabrics assets

 

 

30,459

 

 

 

34,520

 

 

 

31,384

 

Total segment assets

 

 

95,850

 

 

 

105,088

 

 

 

102,157

 

Non-segment assets:

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

13,472

 

 

 

16,812

 

 

 

10,012

 

Short-term investments - rabbi trust

 

 

954

 

 

 

791

 

 

 

903

 

Short-term note receivable

 

 

268

 

 

 

252

 

 

 

264

 

Current income taxes receivable

 

 

532

 

 

 

202

 

 

 

350

 

Other current assets

 

 

3,590

 

 

 

3,578

 

 

 

3,371

 

Long-term note receivable

 

 

1,394

 

 

 

1,661

 

 

 

1,462

 

Deferred income taxes

 

 

528

 

 

 

476

 

 

 

518

 

Property, plant and equipment (9)

 

 

534

 

 

 

646

 

 

 

585

 

Right of use assets (10)

 

 

2,437

 

 

 

3,090

 

 

 

2,624

 

Intangible assets

 

 

1,782

 

 

 

2,158

 

 

 

1,876

 

Long-term investments - rabbi trust

 

 

7,089

 

 

 

7,204

 

 

 

7,102

 

Other assets

 

 

709

 

 

 

944

 

 

 

830

 

Total assets

 

$

129,139

 

 

$

142,902

 

 

$

132,054

 

 

 

(5)
The $28.8 million as of July 28, 2024, represents property, plant, and equipment of $20.9 million, $7.4 million, and $511,000 located in the U.S., Canada, and Haiti, respectively. The $32.8 million as of July 30, 2023, represents property, plant, and equipment of $22.1 million, $10.1 million, and $594,000 located in the U.S., Canada, and Haiti, respectively. The $31.5 million as of April 28, 2024, represents property, plant, and equipment of $21.5 million, $9.4 million, and $555,000 located in the U.S., Canada, and Haiti, respectively.
(6)
The $568,000 as of July 28, 2024, represents right of use assets of $350,000 and $218,000 located in Haiti and Canada, respectively. The $2.1 million as of July 30, 2023, represents right of use assets of $1.4 million and $720,000 located in Haiti, and Canada, respectively. The $1.6 million as of April 28, 2024, represents right of use assets of $1.1 million and $545,000 located in Haiti and Canada, respectively.
(7)
The $1.1 million as of July 28, 2024, represents property, plant, and equipment of $990,000 and $108,000 located in the U.S., and China, respectively. The $1.5 million as of July 30, 2023, represents property, plant, and equipment of $1.0 million, $327,000, and $159,000 located in the U.S., Haiti, and China, respectively. The $1.1 million as of April 28, 2024, represents property, plant, and equipment of $1.0 million and $120,000 located in the U.S., and China, respectively.
(8)
The $1.5 million as of July 28, 2024, represents right of use assets of $1.1 million and $393,000 located in the U.S., and China, respectively. The $2.2 million as of July 30, 2023, represents right of use assets of $1.2 million and $977,000 located in China and the U.S., respectively. The $2.0 million as of April 28, 2024, represents right of use assets of $1.3 million and $709,000 located in China and the U.S., respectively.
(9)
The $534,000, $646,000, and $585,000 as of July 28, 2024, July 30, 2023, and April 28, 2024, respectively, represents 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.
(10)
The $2.4 million, $3.1 million, and $2.6 million as of July 28, 2024, July 30, 2023, and April 28, 2024, respectively, represent right of use assets located in the U.S.

 

Information about capital expenditures and depreciation expense for our operating segments follows:

 

 

 

 

Three months ended

 

(dollars in thousands)

 

July 28, 2024

 

 

July 30, 2023

 

Capital expenditures (11):

 

 

 

 

 

 

Mattress Fabrics

 

$

134

 

 

$

523

 

Upholstery Fabrics

 

 

68

 

 

 

158

 

Unallocated Corporate

 

 

12

 

 

 

33

 

Total capital expenditures

 

$

214

 

 

$

714

 

Depreciation expense:

 

 

 

 

 

 

Mattress Fabrics (12)

 

$

2,297

 

 

$

1,455

 

Upholstery Fabrics

 

 

159

 

 

 

180

 

Total depreciation expense

 

$

2,456

 

 

$

1,635

 
(11)
Capital expenditure amounts are stated on the accrual basis. See Consolidated Statements of Cash Flows for capital expenditure amounts on a cash basis.
(12)
During the three-month period ending July 28, 2024, depreciation expense for the mattress fabrics segment included additional depreciation expense related to the shortening of useful lives of equipment associated with the gradual discontinuation of operations regarding our manufacturing facility located in Quebec, Canada. The amount of additional depreciation expense was $875,000 and was classified as restructuring expense.