CULP INC - 10-Q filing on 2017-03-10

Segment Information

9 Months Ended

Jan. 29, 2017

12. Segment Information

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 to bedding manufacturers. The upholstery fabrics segment sources, manufactures, and sells fabrics primarily to residential furniture manufacturers.

We evaluate the operating performance of our segments based upon income from operations before certain unallocated corporate expenses and other non-recurring items. Cost of sales in both segments include costs to 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 executive officers, all costs related to 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, investment in an unconsolidated joint venture, goodwill, a non-compete agreement, and customer relationships associated with an acquisition.

Financial information for the company’s operating segments follows:

	Three months ended
(dollars in thousands)	January 29, 2017			January 31, 2016
Net sales:
Mattress Fabrics	$	45,920		$	44,277
Upholstery Fabrics		30,249			34,189
	$	76,169		$	78,466
Gross profit:
Mattress Fabrics	$	9,758		$	8,751
Upholstery Fabrics		7,001			7,812
	$	16,759		$	16,563
Selling, general, and administrative expenses:
Mattress Fabrics	$	3,391		$	2,953
Upholstery Fabrics		3,901			3,963
Total segment selling, general, and
administrative expenses		7,292			6,916
Unallocated corporate expenses		2,532			2,421
	$	9,824		$	9,337
Income from operations:
Mattress Fabrics	$	6,367		$	5,798
Upholstery Fabrics		3,100			3,849
Total segment income from operations		9,467			9,647
Unallocated corporate expenses		(2,532	)		(2,421	)
Total income from operations		6,935			7,226
Interest income		124			38
Other expense		(69	)		(85	)
Income before income taxes	$	6,990		$	7,179

	Nine months ended
(dollars in thousands)	January 29, 2017			January 31, 2016
Net sales:
Mattress Fabrics	$	141,977		$	137,522
Upholstery Fabrics		90,217			98,085
	$	232,914		$	235,607
Gross profit:
Mattress Fabrics	$	32,414		$	28,133
Upholstery Fabrics		19,665			20,365
	$	52,079		$	48,498
Selling, general, and administrative expenses:
Mattress Fabrics	$	10,185		$	8,865
Upholstery Fabrics		11,086			11,372
Total segment selling, general, and
administrative expenses		21,271			20,237
Unallocated corporate expenses		7,900			7,275
	$	29,171		$	27,512
Income from operations:
Mattress Fabrics	$	22,229		$	19,267
Upholstery Fabrics		8,579			8,994
Total segment income from operations		30,808			28,261
Unallocated corporate expenses		(7,900	)		(7,275	)
Total income from operations		22,908			20,986
Interest income		164			150
Other expense		(376	)		(405	)
Income before income taxes	$	22,696		$	20,731

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

(dollars in thousands)	January 29, 2017		January 31, 2016		May 1, 2016
Segment assets:
Mattress Fabrics
Current assets (1)	$	41,498	$	44,309	$	43,472
Non-compete agreement		847		922		903
Customer relationships		677		728		715
Investment in unconsolidated joint venture		600		-		-
Goodwill		11,462		11,462		11,462
Property, plant and equipment (2)		47,755		35,637		37,480
Total mattress fabrics assets		102,839		93,058		94,032
Upholstery Fabrics
Current assets (1)		27,421		30,960		26,540
Property, plant and equipment (3)		1,826		1,590		1,564
Total upholstery fabrics assets		29,247		32,550		28,104
Total segment assets		132,086		125,608		122,136
Non-segment assets:
Cash and cash equivalents		15,659		31,713		37,787
Short-term investments		2,410		4,259		4,359
Deferred income taxes		422		4,312		2,319
Income taxes receivable		-		23		155
Other current assets		2,514		2,331		2,477
Property, plant and equipment (4)		752		930		929
Long-term investments (Held-to-Maturity)		30,832		-		-
Long-term investments (Rabbi Trust)		5,488		3,590		4,025
Other assets		893		785		955
Total assets	$	191,056	$	173,551	$	175,142

	Nine months ended
(dollars in thousands)	January 29, 2017		January 31, 2016
Capital expenditures (5):
Mattress Fabrics	$	14,957	$	6,215
Upholstery Fabrics		645		481
Unallocated Corporate		72		381
Total capital expenditures	$	15,674	$	7,077
Depreciation expense:
Mattress Fabrics	$	4,673	$	4,273
Upholstery Fabrics		631		615
Total depreciation expense	$	5,304	$	4,888

(1)	Current assets represent accounts receivable and inventory for the respective segment.

(2)

The $47.8 million at January 29, 2017, represents property, plant, and equipment of $32.6 million and $15.2 million located in the U.S. and Canada, respectively. The $35.6 million at January 31, 2016, represents property, plant, and equipment of $23.0 million and $12.6 million located in the U.S. and Canada, respectively. The $37.5 million at May 1, 2016, represents property, plant, and equipment of $24.8 million and $12.7 million located in the U.S. and Canada, respectively.

(3)

The $1.8 million at January 29, 2017, represents property, plant, and equipment of $1.1 million and $711 located in the U.S. and China, respectively. The $1.6 million at January 31, 2016, represents property, plant, and equipment of $860 and $730 located in the U.S. and China, respectively. The $1.6 million at May 1, 2016, represents property, plant, and equipment of $893 and $671 located in the U.S. and China, respectively.

(4)

The $752, $930, and $929 at January 29, 2017, January 31, 2016 and May 1, 2016, respectively, represent property, plant, and equipment associated with unallocated corporate departments and corporate departments shared by both the mattress and upholstery fabric 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.