18.

SEGMENT INFORMATION

The company’s operations are classified into two business segments: mattress fabrics and upholstery fabrics. The mattress fabrics segment manufacturers, sources, and sells fabrics and mattress covers to bedding manufacturers. The upholstery fabrics segment manufacturers, sources, and sells fabrics primarily to residential and commercial furniture manufacturers.

Net sales denominated in U.S. dollars accounted for 90%, 92% and 93% of total consolidated net sales in fiscal 2018, 2017, and 2016, respectively. International sales accounted for 23% of net sales in fiscal 2018 and 22% of net sales in fiscal years 2017 and 2016, and are summarized by geographic area as follows:


(dollars in thousands)	2018		2017		2016
north america (excluding USA) (1)	$	27,844		29,995		31,667
far east and asia (2)		40,671		34,695		31,927
all other areas		5,681		3,618		4,336

	$	74,196		68,308		67,930

(1)	Of this amount, $21.9 million, $22.3 million, and $24.2 million are attributable to shipments to Mexico in fiscal 2018, 2017, and 2016, respectively.

(2)	Of this amount $32.6 million, $26.6 million, and $23.1 million are attributable to shipments to China in fiscal 2018, 2017, and 2016, respectively.

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

The company evaluates the operating performance of its 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 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, goodwill, an investment in an unconsolidated joint venture, a non-compete agreement and customer relationships associated with an acquisition. The upholstery fabrics segment also includes in segment assets goodwill, customer relationships, and tradename associated with the acquisition of Read Window Products, LLC. (see note 2 for further details).

Statements of operations for the company’s operating segments are as follows:


(dollars in thousands)	2018			2017			2016
net sales:
upholstery fabrics	$	131,128			118,739			126,441
mattress fabrics		192,597			190,805			186,419

	$	323,725			309,544			312,860

gross profit:
upholstery fabrics	$	25,836			26,170			26,393
mattress fabrics		38,797			43,065			38,718

	$	64,633			69,235			65,111


(dollars in thousands)	2018			2017			2016
selling, general, and administrative expenses:
upholstery fabrics	$	14,881			15,079			15,094
mattress fabrics		12,935			13,685			12,223
unallocated corporate		9,356			10,393			9,456

total selling, general, and administrative expenses	$	37,172			39,157			36,773

Income from operations:
upholstery fabrics	$	10,956			11,091			11,298
mattress fabrics		25,861			29,380			26,496

total segment income from operations		36,817			40,471			37,794
unallocated corporate expenses		(9,356	)		(10,393	)		(9,456	)

total income from operations		27,461			30,078			28,338
interest expense		(94	)		—			—
interest income		534			299			176
other expense		(1,018	)		(681	)		(616	)

income before income taxes	$	26,883			29,696			27,898

One customer within the upholstery fabrics segment represented 12%, 11%, and 13% of consolidated net sales in fiscal 2018, 2017 and 2016, respectively. One customer within the mattress fabrics segment represented 13% of consolidated net sales in fiscal 2018, 2017, and 2016, respectively. One customer within the upholstery fabrics segment accounted for 13% of the net accounts receivable balance as of April 29, 2018 and no customers within the upholstery fabrics segment accounted for 10% or more of net accounts receivable as of April 30, 2017. Two customers within the mattress fabrics segment accounted for 20% and 22% of the net accounts receivable balance as of April 29, 2018 and April 30, 2017, respectively.

The hourly employees at our manufacturing facility 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, 2020. We are not aware of any efforts to organize any more of our employees, and we believe our relations with our employees are good.

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


(dollars in thousands)	2018			2017			2016
segment assets
mattress fabrics
current assets (1)	$	43,935			47,038			43,472
non-compete agreements, net		753			828			903
customer relationships		613			664			715
goodwill		11,462			11,462			11,462
investment in unconsolidated joint venture		1,501			1,106			—
property, plant, and equipment		48,797	(2)		48,916	(3)		37,480	(4)

total mattress fabrics assets	$	107,061			110,014			94,032

upholstery fabrics
current assets (1)	$	35,826			29,021			26,540
customer relationships		2,226			—			—
tradename		683			—			—
goodwill		2,107			—			—
property, plant, and equipment		2,445	(5)		1,879	(6)		1,564	(7)

total upholstery fabrics assets	$	43,287			30,900			28,104

total segment assets		150,348			140,914			122,136
non-segment assets
cash and cash equivalents		21,228			20,795			37,787
short-term investments – available for sale		2,451			2,443			4,359
short-term investments – held-to-maturity		25,759			—			—
income taxes receivable		—			—			155
deferred income taxes		1,458			419			2,319
other current assets		2,870			2,894			2,477
property, plant, and equipment		552	(8)		856	(8)		929	(8)
long-term investments - held-to-maturity		5,035			30,945			—
long-term investments - rabbi trust		7,326			5,466			4,025
other assets		957			902			955

total assets	$	217,984			205,634			175,142


capital expenditures (9):
mattress fabrics	$	6,713	17,689	9,666
upholstery fabrics		488	822	626
unallocated corporate		238	260	416

	$	7,439	18,771	10,708

depreciation expense
mattress fabrics	$	6,850	6,245	5,837
upholstery fabrics		822	840	834

total segment depreciation expense	$	7,672	7,085	6,671

(1)	Current assets represent accounts receivable and inventory.

(2)	The $48.8 million at April 29, 2018, represents property, plant, and equipment located in the U.S. of $35.4 million and located in Canada of $13.4 million.

(3)	The $48.9 million at April 30, 2017, represents property, plant, and equipment located in the U.S. of $34.0 million and located in Canada of $14.9 million.

(4)	The $37.5 million at May 1, 2016, represents property, plant, and equipment located in the U.S. of $24.8 million and located in Canada of $12.7 million.

(5)	The $2.4 million at April 29, 2018, represents property, plant, and equipment located in the U.S. of $1.8 million and located in China of $661.

(6)	The $1.9 million at April 30, 2017, represents property, plant, and equipment located in the U.S. of $1.2 million and located in China of $655.

(7)	The $1.6 million at May 1, 2016, represents property, plant, and equipment located in the U.S. of $893 and located in China of $671.

(8)	The $552, $856, and $929 balance at April 29, 2018, April 30, 2017, and May 1, 2016, represent property, plant, and equipment associated with unallocated corporate departments and corporate departments shared by both the mattress and upholstery fabric segments located in the U.S.

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