Segment Information

12 Months Ended

May 02, 2021

Segment Reporting [Abstract]

Segment Information

18. SEGMENT INFORMATION

Overall

Continuing Operations

Our continuing 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 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 of Read’s own 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.

Discontinued Operation – Home Accessories Segment

As disclosed in Note 3 of the consolidated financial statements, we sold our entire ownership interest in eLuxury on March 31, 2020, and consequently our home accessories segment was eliminated at such time. Additionally, the results of operations associated with our home accessories segment were excluded from our continuing operations and presented as a discontinued operation in our consolidated financial statements for fiscal years 2020 and 2019.

Our former home accessories segment was our finished products business that manufactured, sourced, and sold bedding accessories and home goods directly to consumers and businesses through global e-commerce, business-to-business, and other sales channels.

See Note 3 of the consolidated financial statements for detailed financial information of our former home accessories segment. A reconciliation is provided in Note 3 that contains detailed income statement information and is reconciled to net loss from discontinued operation presented in the Consolidated Statements of Net Income (Loss) for fiscal years 2020 and 2019.

Net Sales Geographic Concentration

Net sales denominated in U.S. dollars accounted for 91%, 93%, and 90% of total consolidated net sales in fiscal 2021, 2020, and 2019, respectively. International sales accounted for 27%, 26%, and 26% of net sales during fiscal 2021, 2020, and 2019, respectively, and are summarized by geographic area as follows:

(dollars in thousands)	2021		2020		2019
north america (excluding USA) (1)	$	32,925	$	27,637	$	29,247
far east and asia (2)		43,764		36,470		39,277
all other areas		5,558		2,986		3,712
	$	82,247	$	67,093	$	72,236

(1) Of this amount, $27.2 million, $21.7 million, and $22.5 million are attributable to shipments to Mexico in fiscal 2021, 2020, and 2019, respectively.

(2) Of this amount $28.1 million, $21.4 million, and $29.8 million are attributable to shipments to China in fiscal 2021, 2020, and 2019, respectively.

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

Customer Concentration

One customer within the upholstery fabrics segment represented 13%, 12%, and 11% of consolidated net sales during fiscal 2021, 2020, and 2019, respectively. No customers within the upholstery fabrics segment accounted for greater than 10% of the consolidated net accounts receivable balance as of May 2, 2021, or May 3, 2020.

No customers within the mattress fabrics segment represented greater than 10% of consolidated net sales during fiscal 2021, 2020, or fiscal 2019. One customer within the mattress fabrics segment accounted for 12% of the consolidated net accounts receivable balance as of May 2, 2021.  No customers within the mattress fabrics segment accounted for greater than 10% of the consolidated net accounts receivable balance as of May 3, 2020.

Employee Workforce Concentration

The hourly employees associated with our manufacturing facility located in Canada (approximately 12% of our workforce) are represented by a local, unaffiliated union. The collective bargaining agreement for these employees expires on February 1, 2023. 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 current business segments based upon income (loss) from continuing operations before certain unallocated corporate expenses, asset impairment charges, restructuring expense (credit) and related charges, and other non-recurring items. Cost of sales in each of our current business segments include 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 senior executives and their support staff, all costs associated 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, property, plant, and equipment, and right of use assets. The mattress fabrics segment also included in segment assets their investment in an unconsolidated joint venture as of May 3, 2020.  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 our current operating segments are as follows:

(dollars in thousands)	2021			2020			2019
net sales by segment:
upholstery fabrics	$	142,049		$	124,754			135,654
mattress fabrics		157,671			131,412			145,671
total net sales	$	299,720		$	256,166			281,325
gross profit from continuing operations by segment:
upholstery fabrics	$	25,968		$	24,220			25,373
mattress fabrics		23,864			16,278			22,904
total segment gross profit		49,832			40,498			48,277
other non-recurring charges (1)		—			—			(159	)
restructuring related charges (2)		—			—			(2,349	)
total gross profit from continuing operations	$	49,832		$	40,498			45,769
selling, general, and administrative expenses by segment:
upholstery fabrics	$	14,092		$	14,353			14,551
mattress fabrics		12,066			11,354			11,296
unallocated corporate		11,598			8,717			6,838
total segment selling, general, and administrative expenses		37,756			34,424			32,685
other non-recurring charges (3)		—			—			518
restructuring related charges (4)		—			—			40
total selling, general, and administrative expenses	$	37,756		$	34,424			33,243
income (loss) from continuing operations:
upholstery fabrics	$	11,876		$	9,867			10,823
mattress fabrics		11,798			4,924			11,607
unallocated corporate expenses		(11,598	)		(8,717	)		(6,838	)
total segment income from continuing operations		12,076			6,074			15,592
asset impairments (7)		—			(13,712	)		—
other non-recurring charges (1) (3)		—			—			(678	)
restructuring credit and related charges (5) (6)		—			70			(1,563	)
total income (loss) from continuing operations		12,076			(7,568	)		13,351
interest expense		(51	)		(106	)		(35	)
interest income		244			897			789
gain on bargain purchase (8)		819			—			—
other expense		(2,208	)		(902	)		(1,383	)
income (loss) before income taxes from continuing operations	$	10,880		$	(7,679	)		12,722

(1) The $159,000 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 $784,000 for other operating costs associated with our closed Anderson, SC upholstery fabrics facility.

(3) The $518,000 represents a non-recurring charge of $429,000 for the accelerated vesting of certain stock-based compensation agreements associated with a senior executive and was recorded in unallocated corporate expenses. Additionally, the $518,000 includes $89,000 for employee termination benefits and operational reorganizational costs associated with our mattress fabrics segment.

(4) The $40,000 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 facility.

(5) The $1.6 million represent charges and credits that were associated our closed Anderson, SC upholstery fabrics facility and include $1.6 million for inventory markdowns, $784,000 for other operating costs, $661,000 for employee termination benefits, and $40,000 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 of $1.6 million, a charge of $2.3 million, a charge of $40,000 and a credit of $825,000 were recorded in cost of sales, selling, general, and administrative expenses, and restructuring credit, respectively, in the fiscal 2019 Consolidated Statement of Net Income.

(7) During fiscal 2020, we incurred asset impairment charges totaling $13.7 million, of which $13.6 million and $143,000 pertained to goodwill associated with our mattress and upholstery fabric segments and a tradename associated Read, respectively. Of this $13.7 million, $11.5 million and $2.2 million pertained to the mattress fabrics segment and upholstery fabrics segment, respectively.

(8) Effective February 1, 2021, we acquired the remaining fifty percent ownership interest in our former unconsolidated joint venture located in Haiti.  Pursuant to this transaction, we are now the sole owner with full control over this operation.  The gain on bargain purchase represents the net assets acquired from this transaction that were more than the $954,000 total purchase price.

Balance sheet information for our current operating segments follow:

(dollars in thousands)	May 2, 2021			May 3, 2020
segment assets
mattress fabrics
accounts receivable	$	20,427		$	12,212
inventory		30,047			26,620
property, plant, and equipment		41,264	(1)		40,682	(2)
right of use assets		4,278	(3)		362	(4)
investment in unconsolidated joint venture		—			1,602
total mattress fabrics assets		96,016			81,478
upholstery fabrics
accounts receivable		17,299			12,881
inventory		25,870			21,287
property, plant, and equipment		1,925	(5)		1,633	(6)
right of use assets		5,945	(7)		1,633	(8)
total upholstery fabrics assets		51,039			37,434
total segment assets		147,055			118,912
non-segment assets
cash and cash equivalents		37,009			69,790
short-term investments – available for sale		5,542			923
short-term investments – held-to-maturity		3,161			4,271
current income taxes receivable		—			1,585
deferred income taxes		545			793
other current assets		3,852			2,116
property, plant, and equipment (9)		814			832
right of use assets (10)		1,507			1,908
intangible assets		3,004			3,380
long-term investments - held-to-maturity		1,141			2,076
long-term investments - rabbi trust		8,415			7,834
other assets		2,035			664
total assets	$	214,080		$	215,084

(dollars in thousands)	2021		2020		2019
capital expenditures (11):
mattress fabrics	$	6,226	$	3,475	$	2,526
upholstery fabrics		347		348		382
discontinued operation		—		135		53
unallocated corporate		332		675		14
total capital expenditures	$	6,905	$	4,633	$	2,975
depreciation expense
mattress fabrics	$	6,014	$	6,712	$	7,008
upholstery fabrics		832		765		787
discontinued operation		—		350		322
total depreciation expense	$	6,846	$	7,827	$	8,117

(1) The $41.3 million as of May 2, 2021, represents property, plant, and equipment of $28.4 million, $12.0 million, and $855,000 located in the U.S., Canada, and Haiti, respectively.  

(2) The $40.7 million as of May 3, 2020, represents property, plant, and equipment of $27.7 million and $13.0 million located in the U.S. and Canada, respectively.  

(3) The $4.3 million as of May 2, 2021, represents right of use assets of $2.4 million, $1.4 million, and $400,000 located in Haiti, the U.S., and Canada, respectively.

(4) The $362,000 as of May 3, 2020, represents right of use assets located in the U.S.

(5) The $1.9 million as of May 2, 2021, represents property, plant, and equipment of $1.1 million and $850,000 located in the U.S. and China, respectively.  

(6) The $1.6 million as of May 3, 2020, represents property, plant, and equipment of $1.2 million and $471,000 located in the U.S. and China, respectively.

(7) The $5.9 million as of May 2, 2021, represents right of use assets of $5.0 million and $952,000 located in China and the U.S., respectively.

(8) The $1.6 million as of May 3, 2020, represents right of use assets of $857,000 and $776,000 located in the U.S. and China, respectively.

(9) The $814,000 as of May 2, 2021, and $832,000 as of May 3, 2020, represent property, plant, and equipment associated with unallocated corporate departments and corporate departments shared by both the mattress fabrics and upholstery fabrics segments located in the U.S.

(10) The $1.5 million as of May 2, 2021, and $1.9 million as of May 3, 2020, represents right of use assets located in the U.S. associated with unallocated corporate departments and corporate departments shared by both the mattress fabrics and upholstery fabrics segments located in the U.S.  

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