v3.25.2
Segment Information
 3 Months Ended
Aug. 03, 2025
Segment Reporting [Abstract]  
Segment Information

14. Segment Information

During the first quarter of fiscal 2026, we renamed our two reportable business segments to better reflect our product offerings. Our former mattress fabrics segment is now known as the bedding segment and our former upholstery fabrics segment is now known as the upholstery segment. The bedding segment manufactures, sources, and sells fabrics and mattress covers primarily to bedding manufacturers. The upholstery segment develops, sources, manufactures, and sells fabrics primarily to residential, commercial, and hospitality furniture manufacturers.

In addition, the upholstery segment includes Read, a wholly owned subsidiary that operates a leased facility in Knoxville, Tennessee which provides window treatments and sourcing of upholstery fabrics and other products, as well as related measuring and installation services to customers in the hospitality and commercial markets. Read also supplies soft goods such as decorative top sheets, coverlets, duvet covers, bed skirts, bolsters, and pillows. On April 24, 2025 (the fourth quarter of fiscal 2025), the company announced a strategic transformation of its operating model that will combine certain activities within the bedding and upholstery business segments and create one integrated Culp-branded business. As part of this strategic transformation, we will close our leased facilities operated by our upholstery segment located in Burlington, North Carolina and Knoxville, Tennessee, and will transition their production and distribution activities to a shared management model within our owned facility located in Stokesdale, North Carolina. See note 10 of the consolidated financial statements for further details regarding this strategic transformation initiative.

 

Our Chief Operating Decision Maker ("CODM") is our Chief Executive Officer ("CEO"), who regularly reviews the financial results of the company on a consolidated and business segment basis for the purpose of evaluating financial and operating performance and allocation of resources to the individual segments noted above. Beginning in the first quarter of fiscal 2026, the CODM decided to use net sales and gross profit, excluding items that are not expected to occur on a regular basis (i.e. restructuring activities), as the primary measure of segment profit or loss. Previously, segment performance was primarily evaluated based on net sales and income (loss) from operations before unallocated corporate expenses and other items that are not expected to occur on a regular basis (i.e., restructuring activities). This change was made to align with internal management reporting and the decision-making processes affected by the strategic transformation of the company's operating model announced on April 24, 2025, which combined certain activities within the bedding and upholstery business segments and created one integrated Culp-branded business. The CODM evaluates segment performance based on (i) net sales, (ii) cost of sales, (iii) gross profit excluding

items that are not expected to occur on a regular basis (i.e. restructuring related charges and credits), (iv) assets used in operations, which generally include accounts receivable, inventory, property, plant, and equipment, right of use assets, and assets held for sale; and (v) capital spending.

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. Intangible assets are not included in segment assets, as these assets are not used by the CODM to evaluate the respective segment’s operating performance and allocate resources to the individual segments.

Statements of operations for our operating segments are as follows:

 

 

 

Three months ended

 

 

 

August 3, 2025

 

 

July 28, 2024

 

Net sales by segment:

 

 

 

 

 

 

Bedding

 

$

28,046

 

 

$

28,076

 

Upholstery

 

 

22,645

 

 

 

28,461

 

Net sales

 

$

50,691

 

 

$

56,537

 

Cost of Sales by segment:

 

 

 

 

 

 

Bedding

 

$

25,104

 

 

$

28,402

 

Upholstery

 

 

18,359

 

 

 

22,943

 

Total segment cost of sales

 

$

43,463

 

 

$

51,345

 

Restructuring related charge (1)

 

 

—

 

 

 

116

 

Cost of Sales

 

$

43,463

 

 

$

51,461

 

Gross profit (loss) by segment:

 

 

 

 

 

 

Bedding

 

$

2,942

 

 

$

(326

)

Upholstery

 

 

4,286

 

 

 

5,518

 

Total segment gross profit

 

$

7,228

 

 

$

5,192

 

Restructuring related charge (1)

 

 

—

 

 

 

(116

)

Gross profit

 

$

7,228

 

 

$

5,076

 

Selling, general, and administrative expenses

 

 

(9,119

)

 

 

(9,296

)

Restructuring credit (expense) (2)(3)

 

 

3,508

 

 

 

(2,631

)

Income (loss) from operations

 

$

1,617

 

 

$

(6,851

)

Interest expense

 

 

(183

)

 

 

(28

)

Interest income

 

 

235

 

 

 

262

 

Other expense

 

 

(531

)

 

 

(404

)

Income (loss) before income taxes

 

$

1,138

 

 

$

(7,021

)

 

 

(1) For the three-month period ended July 28, 2024, cost of sales and gross profit included restructuring related charges totaling $116,000 for losses on the disposal and valuation of inventory related to the gradual discontinuation of operations at our manufacturing facility located in Quebec, Canada, which such facility was sold during the first quarter of fiscal 2026. See Note 10 to the consolidated financial statements for further details and a description of our restructuring activities.

 

(2) For the three-month period ended August 3, 2025, the $3.5 million restructuring credit mostly represented a gain from the sale of the Property located in Quebec, Canada, totaling $4.0 million, partially offset by charges related to activities to transform our operating model and reduce fixed costs. See Note 10 to the consolidated financial statements for further details and a description of our restructuring activities.

 

(3) For the three-month period ended July 28, 2024, the $2.6 million restructuring expense represented costs that were mostly associated with consolidating the company's North American mattress fabrics manufacturing and distribution facilities and the consolidation of two leased facilities related to cut and sewn mattress cover operations located in Ouanaminthe, Haiti.

 

 

Balance sheet information for our operating segments follows:

 

(dollars in thousands)

 

August 3, 2025

 

 

July 28, 2024

 

 

April 27, 2025

 

Segment assets:

 

 

 

 

 

 

 

 

 

Bedding:

 

 

 

 

 

 

 

 

 

Accounts receivable

 

$

10,216

 

 

$

10,094

 

 

$

10,576

 

Inventory

 

 

35,102

 

 

 

25,278

 

 

 

33,293

 

Property, plant and equipment (1)

 

 

22,061

 

 

 

28,844

 

 

 

23,259

 

Right of use assets (2)

 

 

50

 

 

 

568

 

 

 

125

 

Assets held for sale (3)

 

 

40

 

 

 

607

 

 

 

2,177

 

Total bedding assets

 

 

67,469

 

 

 

65,391

 

 

 

69,430

 

Upholstery:

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 

8,166

 

 

 

11,493

 

 

 

11,268

 

Inventory

 

 

15,007

 

 

 

16,390

 

 

 

16,016

 

Property, plant and equipment (4)

 

 

956

 

 

 

1,098

 

 

 

1,010

 

Right of use assets (5)

 

 

2,159

 

 

 

1,478

 

 

 

2,678

 

Total upholstery assets

 

 

26,288

 

 

 

30,459

 

 

 

30,972

 

Total segment assets

 

 

93,757

 

 

 

95,850

 

 

 

100,402

 

Non-segment assets:

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

11,094

 

 

 

13,472

 

 

 

5,629

 

Short-term investments - rabbi trust

 

 

1,395

 

 

 

954

 

 

 

1,325

 

Short-term notes receivable

 

 

5,104

 

 

 

268

 

 

 

280

 

Current income taxes receivable

 

 

—

 

 

 

532

 

 

 

—

 

Other current assets

 

 

2,767

 

 

 

3,590

 

 

 

2,970

 

Long-term notes receivable

 

 

1,078

 

 

 

1,394

 

 

 

1,182

 

Deferred income taxes

 

 

475

 

 

 

528

 

 

 

637

 

Property, plant and equipment (6)

 

 

535

 

 

 

534

 

 

 

567

 

Right of use assets (7)

 

 

2,953

 

 

 

2,437

 

 

 

3,105

 

Intangible assets

 

 

865

 

 

 

1,782

 

 

 

960

 

Long-term investments - rabbi trust

 

 

5,715

 

 

 

7,089

 

 

 

5,722

 

Other assets

 

 

676

 

 

 

709

 

 

 

591

 

Total assets

 

$

126,414

 

 

$

129,139

 

 

$

123,370

 

 

 

(1)
The $22.1 million as of August 3, 2025, represents property, plant, and equipment of $21.2 million and $888,000 located in the U.S. and Haiti, respectively. 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 $23.3 million as of April 27, 2025, represents property, plant, and equipment of $22.3 million and $955,000 located in the U.S. and Haiti, respectively.
(2)
The $50,000 as of August 3, 2025, represents a right of use asset in Haiti. 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 $125,000 as of April 27, 2025, represents a right of use asset in Haiti.
(3)
The $40,000 as of August 3, 2025, represents assets held for sale located in the U.S. The $607,000 as of July 28, 2024, represents assets held for sale of $357,000 and $250,000 located in the U.S. and Haiti, respectively. The $2.2 million as of April 27, 2025, represents assets held for sale located in Canada.
(4)
The $956,000 as of August 3, 2025, represents property, plant, and equipment of $897,000 and $59,000 located in the U.S. and China, respectively. 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 $1.0 million as of April 27, 2025, represents property, plant, and equipment of $940,000 and $70,000 located in the U.S. and China, respectively.
(5)
The $2.2 million as of August 3, 2025, represents right of use assets of $1.4 million and $771,000 located in China and the U.S., respectively. The $1.5 million as of July 28, 2024, represents right of use assets of $1.1 million and $393,00 located in U.S. and China, respectively. The $2.7 million as of April 27, 2025, represents right of use assets of $1.7 million and $1.0 million located in China and the U.S., respectively.
(6)
The $535,000, $534,000, and $567,000 as of August 3, 2025, July 28, 2024, and April 27, 2025, respectively, represents property, plant, and equipment located in the U.S.
(7)
The $3.0 million, $2.4 million, and $3.1 million as of August 3, 2025, July 28, 2024, and April 27, 2025, 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)

 

August 3, 2025

 

 

July 28, 2024

 

Capital expenditures (1):

 

 

 

 

 

 

Bedding

 

$

100

 

 

$

134

 

Upholstery

 

 

50

 

 

 

68

 

Non-Segment

 

 

14

 

 

 

12

 

Total capital expenditures

 

$

164

 

 

$

214

 

Depreciation expense:

 

 

 

 

 

 

Bedding

 

$

889

 

 

$

1,284

 

Upholstery

 

 

40

 

 

 

39

 

Selling, general and administrative

 

 

182

 

 

 

258

 

Total depreciation expense

 

$

1,111

 

 

$

1,581

 

Accelerated depreciation expense (2) (3)

 

 

22

 

 

 

875

 

Total

 

$

1,133

 

 

$

2,456

 
(1)
Capital expenditure amounts are stated on an accrual basis. See Consolidated Statements of Cash Flows for capital expenditure amounts on a cash basis.
(2)
During the three-month period ended August 3, 2025, accelerated depreciation expense totaling $22,000 related to the upholstery segment and was classified within restructuring credit in the Consolidated Statements of Net Loss. The accelerated depreciation expense pertained to the shortening of useful lives of equipment related to the consolidation of distribution activities from our Burlington, North Carolina facility to the manufacturing and distribution center located in Stokesdale, North Carolina.
(3)
During the three-month period ended July 28, 2024, accelerated depreciation expense totaling $875,000 related to the bedding segment and was classified within restructuring expense in the Consolidated Statements of Net Loss. The accelerated depreciation expense related to the shortening of useful lives of equipment associated with the closure of our operations located in Quebec, Canada.