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What changed in CULP INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of CULP INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+432 added−431 removedSource: 10-K (2023-07-14) vs 10-K (2022-07-15)

Top changes in CULP INC's 2023 10-K

432 paragraphs added · 431 removed · 288 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

106 edited+32 added−56 removed78 unchanged
Biggest changeIn addition, we enhanced our focus on design creativity and innovation with the launch of our new innovation campus in High Point, North Carolina, during the first quarter of fiscal 2022. 2 Additional information about trends and developments in each of our business segments is provided in the “Segments” discussion below, as well as in our “Management’s Discussion and Analysis” in Part II, Section 7 of this report.
Biggest changeAdditional information about trends and developments in each of our business segments is provided in the “Segments” discussion below, as well as in our “Management’s Discussion and Analysis” in Part II, Section 7 of this report. General In formation Culp, Inc. was organized as a North Carolina corporation in 1972 and made its initial public offering in 1983.
The company competes in a business driven by fashion and product performance, and we strive to differentiate ourselves by placing a sustained focus on product innovation and creativity. In addition, we place great emphasis on providing excellent and dependable service to our customers.
The company competes in a business driven by fashion and product performance, and we strive to differentiate ourselves by placing a sustained focus on creativity and product innovation. In addition, we place great emphasis on providing excellent and dependable service to our customers.
In fiscal 2017, we entered into a 50/50 joint venture with a third party mattress cover provider to construct a second leased location for our mattress cover operations in Haiti, and this joint venture facility began production of mattress covers for our business during the second quarter of fiscal 2018.
In fiscal 2017, we entered into a 50/50 joint venture with a third party mattress cover provider to construct a leased location for our mattress cover operations in Haiti, and this joint venture facility began production of mattress covers for our business during the second quarter of fiscal 2018.
We also enhanced our digital project management platform, which allows us to work with customers from concept ideation and 3D mapping to product life cycle management and final merchandising. In fiscal 2022, we expanded our leading-edge technology at our Canadian manufacturing facility with the addition of a sectional warper and lamination line.
We also enhanced our digital project management platform, which allows us to work with customers from concept ideation and 3D 3 mapping to product life cycle management and final merchandising. In fiscal 2022, we expanded our leading-edge technology at our Canadian manufacturing facility with the addition of a sectional warper and lamination line.
It is difficult to predict the extent to which any new rules or regulations would affect our business, but we would expect the effect on our operations to be similar to that for other manufacturers, particularly those in our industry. We are periodically involved in environmental claims or litigation and requests for information from environmental regulators.
It is difficult to predict the extent to which any new rules or regulations would affect our business, but we would expect the effect on our operations to be similar to that for other manufacturers, particularly those in our industry. 11 We are periodically involved in environmental claims or litigation and requests for information from environmental regulators.
Since 1997, our stock has been listed on the New York Stock Exchange and traded under the symbol “CFI” until July 13, 2017, at which time the 3 Company’s ticker symbol changed to “CULP.” Our fiscal year is the 52- or 53-week period ending on the Sunday closest to April 30.
Since 1997, our stock has been listed on the New York Stock Exchange and traded under the symbol “CFI” until July 13, 2017, at which time the Company’s ticker symbol changed to “CULP.” Our fiscal year is the 52- or 53-week period ending on the Sunday closest to April 30.
We source unfinished and finished fabrics, as well as a portion of our cut and sewn kits, from a limited number of strategic suppliers in China who are willing to commit significant capacity to meet our needs while working with our product development team located in China to meet the demands of our customers.
We source unfinished and finished fabrics, as well as cut and sewn kits, from a limited number of strategic suppliers in China who are willing to commit significant capacity to meet our needs while working with our product development team located in China to meet the demands of our customers.
Upholstery Fabrics Segment A majority of our upholstery fabrics are marketed on a “make to order” basis and are shipped directly from our distribution facilities in Burlington, North Carolina, and Shanghai, China. We also have distribution capabilities in Vietnam.
Upholstery Fabrics Segment A majority of our upholstery fabrics are marketed on a “make to order” basis and are shipped directly from our distribution facilities in Burlington, North Carolina, and Shanghai, China. We also have distribution capabilities in Vietnam and Turkey.
In addition, we operate distribution centers in North Carolina, Canada, China, and Haiti to facilitate distribution of our fabric products, with additional distribution capabilities through strategic relationships in China and Vietnam.
In addition, we operate distribution centers in North Carolina, Canada, China, and Haiti to facilitate distribution of our fabric products, with additional distribution capabilities through strategic relationships in China, Turkey, and Vietnam.
Because purchases of furniture and bedding products are discretionary purchases for most individuals and businesses, demand for these products may be more easily influenced by economic trends than demand for other products.
Because purchases of furniture products are discretionary purchases for most individuals and businesses, demand for these products may be more easily influenced by economic trends than demand for other products.
At the same time, we have 5 maintained control of the most important “value added” aspects of our business, such as design, finishing, quality control, and logistics.
At the same time, we have maintained control of the most important “value added” aspects of our business, such as design, finishing, quality control, and logistics.
We were able to leverage these new technologies during the COVID-19 pandemic, in the face of travel restrictions and cancelled tradeshows, to continue showcasing our products and support our customers through virtual design collaboration. In fiscal 2021, we invested in additional knit machines and other equipment to expand fabric capacity in North America.
We were able to leverage these new technologies during the COVID-19 pandemic, in the face of travel restrictions and canceled tradeshows, to continue showcasing our products and support our customers through virtual design collaboration. In fiscal 2021, we invested in additional knit machines and other equipment to expand fabric capacity in North America.
The result of the increase in imports during this period, and continuing into fiscal 2021, was a decline in sales for the major U.S. bedding manufacturers, which affected major suppliers to those manufacturers, including Culp. 6 As a result of the continued significant influx of low-priced imports that moved from China to other countries, the U.S.
The result 5 of the increase in imports during this period, and continuing into fiscal 2021, was a decline in sales for the major U.S. bedding manufacturers, which affected major suppliers to those manufacturers, including Culp. As a result of the continued significant influx of low-priced imports that moved from China to other countries, the U.S.
A key trend driving the bedding industry is the increased demand for roll-packed/compressed mattresses in both online and traditional sales channels, as consumer acceptance of boxed beds as a delivery mechanism continues to drive growth and increase market share for this product, increasing potential demand for sewn mattress covers.
A key trend driving the bedding industry is the increased demand for roll-packed/compressed mattresses through both online and traditional sales channels. Consumer acceptance of boxed beds as a delivery mechanism continues to drive growth and increase market share for this product, increasing potential demand for sewn mattress covers.
Culp markets a variety of fabrics and other products in different categories to a global customer base, including fabrics produced at our manufacturing facilities and fabrics produced by other suppliers. As of the end of fiscal 2022, we had active production facilities located in North Carolina; Tennessee; Quebec, Canada; Shanghai, China; and Ouanaminthe, Haiti.
Culp markets a variety of fabrics and other products in different categories to a global customer base, including fabrics produced at our manufacturing facilities and fabrics produced by other suppliers. As of the end of fiscal 2023, we had active production facilities located in North Carolina; Tennessee; Quebec, Canada; Shanghai, China; and Ouanaminthe, Haiti.
We view such intellectual property, along with any unregistered copyrights, trademarks, service marks, trade names, domain names, trade dress, trade secrets, and proprietary technologies, as an important part of our business, and we seek to diligently protect, monitor, and defend, through appropriate action, against their unauthorized use. 15
We view such intellectual property, along with any unregistered copyrights, trademarks, service marks, trade names, domain names, trade dress, trade secrets, and proprietary technologies, as an important part of our business, and we seek to diligently protect, monitor, and defend, through appropriate action, against their unauthorized use. 14
We also provide development opportunities that support career growth and maintain a wide variety of programs to engage with our employees and promote overall wellness. We believe these efforts support all of our personnel in the workplace and elsewhere in their lives, which in turn aids in our employee satisfaction and retention.
We also provide development opportunities that support career growth and maintain a wide variety of programs to engage with our employees and promote overall wellness. We believe these efforts support all of our personnel in the workplace and elsewhere in their lives, which in turn promotes employee satisfaction and retention.
For additional segment information, including the geographic location of long-lived assets, see Note 18 in the consolidated financial statements. Backlog Mattress Fabrics Segment The backlog for the mattress fabric segment is not a reliable predictor of future shipments because the majority of sales for the mattress fabrics segment are on a just-in-time basis.
For additional segment information, including the geographic location of long-lived assets, see Note 18 in the consolidated financial statements. Back log Mattress Fabrics Segment The backlog for the mattress fabric segment is not a reliable predictor of future shipments because the majority of sales for the mattress fabrics segment are on a just-in-time basis.
Additionally, with the ongoing global trade dispute between the U.S. and China, including the imposition of tariffs during fiscal 2019 and the possibility for additional tariffs on China imports, some of our customers began altering their supply chains away from China in late fiscal 2019.
Additionally, with the ongoing global trade dispute and other tensions between the U.S. and China, including the imposition of tariffs during fiscal 2019 and the possibility for additional tariffs on China imports, some of our customers began altering their supply chains away from China in late fiscal 2019.
We invest significant resources to stay ahead of current design trends, including maintaining a trained and active design and innovation staff, investing in research and development activities such as participation in international design shows, and implementing systems for creating, cataloguing, and simulating new designs.
We invest significant resources to stay ahead of current design trends, including maintaining a trained and active design and innovation staff, investing in research and development activities such as participation in international design shows, and implementing systems for creating, cataloging, and simulating new designs.
Jerome facilities, while jacquard (damask) fabric is produced solely at the St. Jerome facility. The majority of our finishing and inspection processes for mattress fabrics are conducted at the Stokesdale plant, while the St. Jerome plant provides additional capacity and a second location for these processes.
Knitted fabrics are produced at both the Stokesdale and St. Jerome facilities, while jacquard (damask) fabric is produced solely at the St. Jerome facility. The majority of our finishing and inspection processes for mattress fabrics are conducted at the Stokesdale plant, while the St. Jerome plant provides additional capacity and a second location for these processes.
During the past five years, we completed several multi-year capital projects for the mattress fabrics business, including consolidating certain operations, expanding capacity, improving efficiency and customer service, and maintaining our flexible approach to fabric sourcing.
During the past few years, we completed several multi-year capital projects for the mattress fabrics business, including consolidating certain operations, expanding capacity, improving efficiency and customer service, and maintaining our flexible approach to fabric sourcing.
In this way, we have maintained our ability to provide furniture manufacturers with products from nearly every category of fabric for upholstered furniture and meet continually changing demand levels and consumer preferences. In recent years, we have implemented additional steps to grow net sales, including an emphasis on markets beyond residential furniture, such as the hospitality market.
In this way, we have maintained our ability to provide furniture manufacturers with products from nearly every category of fabric for upholstered furniture and meet continually changing demand levels and consumer preferences. We have also implemented additional steps to grow net sales, including an emphasis on markets beyond residential furniture, such as the hospitality market.
We believe Culp is the largest producer of mattress fabrics in North America and one of the largest marketers of upholstery fabrics for furniture in North America, measured by total sales. Our operations are classified into two operating segments — mattress fabrics and upholstery fabrics.
We believe Culp is one of the largest producers of mattress fabrics in North America and one of the largest marketers of upholstery fabrics for furniture in North America, measured by total sales. Our operations are classified into two operating segments — mattress fabrics and upholstery fabrics.
Department of Commerce imposed anti-dumping dut ies against seven countries , including Cambodia, Indonesia, Malaysia, Serbia, Thailand, Turkey, and Vietnam, during fiscal 2021 . We believe the domestic mattress industry and, in turn, our business, began to realize some benefits from these duties during the second half of fiscal 2021 and continuing into fiscal 2022.
Department of Commerce imposed anti-dumping duties against seven countries, including Cambodia, Indonesia, Malaysia, Serbia, Thailand, Turkey, and Vietnam, during fiscal 2021. We believe the domestic mattress industry and, in turn, our business, began to realize some benefits from these duties during the second half of fiscal 2021 and continuing into fiscal 2022 and fiscal 2023.
We will make this annual report and our other annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports available free of charge on our internet site as soon as reasonably practicable after such material is electronically filed with, or furnished to, the Securities and Exchange Commission (the “SEC”).
We will make this annual report and our other annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports available free of charge on our website as soon as reasonably practicable after such material is electronically filed with, or furnished to, the Securities and Exchange Commission (the “SEC”).
The strength and flexibility of our global manufacturing and sourcing operations in the U.S., Canada, Haiti, Asia, and Turkey enabled us to support the evolving needs of our mattress fabric and cover customers throughout the year.
The strength and flexibility of our global manufacturing and sourcing operations in the U.S., Canada, Haiti, Asia, and Turkey allowed us to support the evolving needs of our mattress fabric and cover customers throughout the year.
One result of these efforts was the acquisition of Read Window Products at the end of fiscal 2018, representing a significant expansion of our production capabilities in the hospitality market, along with the addition of window treatment installation services. Overview of Industry and Markets Culp markets products primarily to manufacturers and hospitality customers in three principal markets.
One result of these efforts was the acquisition of Read Window Products at the end of fiscal 2018, representing a significant expansion of our production capabilities in the hospitality market, along with the addition of window treatment installation services. Overview of Indu stry and Markets Culp markets products primarily to manufacturers and hospitality customers in three principal markets.
Competition Competition for our products is high and is based primarily on price, design, quality, product performance, timing of delivery, and service. 11 Mattress Fabrics Segment The mattress fabrics market is concentrated in a few relatively large suppliers, as well as some niche producers focusing mainly on knitted products.
Compet ition Competition for our products is high and is based primarily on price, design, quality, product performance, timing of delivery, and service. Mattress Fabrics Segment The mattress fabrics market is concentrated in a few relatively large suppliers, as well as some niche producers focusing mainly on knitted products.
Mattress Fabrics. The mattress fabrics segment, also known as Culp Home Fashions, manufactures and markets mattress fabrics and sewn mattress covers to bedding manufacturers. These products include woven jacquard fabrics, knitted fabrics, and some converted fabrics. Culp Home Fashions has manufacturing facilities located in Stokesdale and High Point, North Carolina, and St. Jerome, Quebec, Canada.
Mattress Fabrics. The mattress fabrics segment, also known as Culp Home Fashions, manufactures and markets mattress fabrics and sewn mattress covers to bedding manufacturers. These products include woven jacquard fabrics, knitted fabrics, and some converted fabrics. Culp Home Fashions has fabric manufacturing facilities located in Stokesdale, North Carolina, and St. Jerome, Quebec, Canada.
Additionally, we continued to expand our design capabilities in fiscal 2019, launching new software and a library system for cataloguing our products to drive marketing and enhance innovation.
Additionally, we continued to expand our design capabilities in fiscal 2019, launching new software and a library system for cataloging our products to drive marketing and enhance innovation.
Additionally, we source a portion of our woven jacquard fabric and knitted fabric, which is obtained from a supplier located in Turkey, based on designs and a production schedule created by Culp. Upholstery Fabrics Segment The upholstery fabrics segment currently operates two manufacturing facilities in China.
Additionally, we source a portion of our woven jacquard fabric and knitted fabric from a supplier located in Turkey, based on designs and a production schedule created by Culp. Upholstery Fabrics Segment The upholstery fabrics segment currently operates two manufacturing facilities in China.
Distribution Mattress Fabrics Segment Most of our mattress fabrics shipments originate from our facilities in Stokesdale, North Carolina, and we have additional distribution capabilities in Canada, China, and Haiti.
Distri bution Mattress Fabrics Segment Most of our mattress fabrics shipments originate from our facilities in Stokesdale, North Carolina, and we have additional distribution capabilities in Canada, China, and Haiti.
This space combin e s our design, innovation, and sales teams for both businesses into a shared location to support collaboration across divisions and pull our top creative talent together to develop new products and technologies based on the latest consumer trends. Mattress Fabrics Segment Design innovation is a very important element of producing mattress fabrics.
This space combines our design, innovation, and sales teams for both businesses into a shared location to support collaboration across divisions and pull our top creative talent together to develop new products and technologies based on the latest consumer trends. Mattress Fabrics Segment Design innovation is a very important element of producing mattress fabrics.
Window treatment products sold through our Read Window Products business are done on a “job order” basis, with manufactured products shipped directly from our manufacturing facility in Knoxville, Tennessee to the job installation site. Sources and Availability of Raw Materials Mattress Fabrics Segment Raw materials account for approximately 60%-70% of mattress fabric production costs.
Window treatment products sold through our Read Window Products business are done on a “job order” basis, with manufactured products shipped directly from Read's manufacturing facility in Knoxville, Tennessee to the job installation site. 9 Sources and Availabil ity of Raw Materials Mattress Fabrics Segment Raw materials account for approximately 60%-70% of mattress fabric production costs.
Culp’s success is largely dependent on our ability to market fabrics and products with appealing designs and patterns, as well as performance properties such as cleanability, stain-resistance, cooling, and sustainability.
Culp’s success is largely dependent on our ability to market fabrics and products with appealing designs and patterns, as well as performance properties such as cleanability, stain-resistance, cooling, sustainability, and health-related benefits.
Seasonality Overall, demand for our products generally depends upon consumer demand for furniture and bedding products, which reflects sensitivity to overall economic conditions, including consumer confidence, unemployment rates, and housing market conditions.
Season ality Overall, demand for our products generally depends upon consumer demand for furniture and bedding products, which reflects sensitivity to overall economic conditions, including consumer confidence, unemployment rates, and housing market conditions.
We completed a 40,000-square foot expansion of this Haiti facility during the second quarter of fiscal 2021 to increase capacity, and during the fourth quarter of fiscal 2021, we acquired the remaining fifty percent ownership interest in this Haiti mattress cover business from our previous joint venture partner, giving us full control of the operation.
We completed a 40,000-square foot expansion of this Haiti facility during the second quarter of fiscal 2021 to increase capacity, and during the fourth quarter of fiscal 2021, we acquired the remaining fifty percent ownership interest in this Haiti mattress cover business from our previous joint venture partner, giving us full control of the operation and expanded capacity to meet customer demand from this lower-cost, near-shore operation.
(2) Of this amount $26.9 million, $28.1 million, and $21.4 million are attributable to shipments to China in fiscal 2022, 2021, and 2020, respectively. 14 Sales are attributed to individual countries based upon the location that the company ships its products to for delivery to customers.
(2) Of this amount $20.0 million, $26.9 million, and $28.1 million are attributable to shipments to China in fiscal 2023, 2022, and 2021, respectively. Sales attributed to individual countries are based upon the location that the company ships its products to for delivery to customers.
We are not aware of any efforts to organize any more of our employees, and we believe our employee relations are very good with both our unionized and non-unionized workforce. Our companywide annual employee turnover rate was approximately 25 % during the past fiscal year.
We are not aware of any efforts to organize any more of our employees, and we believe our employee relations are very good with both our unionized and non-unionized workforce. Our company-wide annual employee turnover rate was approximately 42% during the past fiscal year, compared to approximately 25% in the prior year.
Other examples of employee engagement initiatives include: 13 • Monthly wellness sessions on various health-related topics , including a week of programs devoted to mental health during fiscal 2022 • Meetings and video chats with senior management • The CulpVets program, which provides special recognition to military veterans • Employee awards and recognition programs These engagement efforts and programs are continually refined and updated to meet the evolving needs of our workforce.
Other examples of employee engagement initiatives include: • Wellness sessions on various health-related topics • Meetings and video chats with senior management • The CulpVets program, which provides special recognition to military veterans • Employee awards and recognition programs These engagement efforts and programs are continually refined and updated to meet the evolving needs of our workforce.
Additional safety and health programs are planned for the future. Customers and Sales Mattress Fabrics Segment Major customers for our mattress fabrics include leading bedding manufacturers such as Serta-Simmons Bedding (SSB), Tempur + Sealy International (TSI), Casper, Corsicana, Nectar, and Ashley Furniture.
Additional safety and health programs are planned for the future. Customers and Sales Mattress Fabrics Segment Major customers for our mattress fabrics include leading bedding manufacturers such as Serta-Simmons Bedding (SSB), Tempur + Sealy International (TSI), Casper, Corsicana, Sleep Number, and Ashley Furniture. Our mattress fabrics customers also include many small and medium-size bedding manufacturers.
Sales by Fiscal Year ($ in Millions) and Percentage of Total Company Sales Segment Fiscal 2022 Fiscal 2021 Fiscal 2020 Mattress Fabrics $ 152.2 52 % $ 157.7 53 % $ 131.4 51 % Upholstery Fabrics Non-U.S.-Produced 133.2 45 % 133.0 44 % 113.6 44 % U.S.-Produced 9.4 3 % 9.0 3 % 11.1 4 % Total Upholstery 142.6 48 % 142.0 47 % 124.8 49 % Total company $ 294.8 100 % $ 299.7 100 % $ 256.2 100 % Additional financial information about our operating segments can be found in Note 18 of the consolidated financial statements included in Item 8 of this report.
Sales by Fiscal Year ($ in Millions) and Percentage of Total Company Sales Segment Fiscal 2023 Fiscal 2022 Fiscal 2021 Mattress Fabrics $ 111.0 47 % $ 152.2 52 % $ 157.7 53 % Upholstery Fabrics Non-U.S.-Produced 114.5 49 % 133.2 45 % 133.0 44 % U.S.-Produced 9.4 4 % 9.4 3 % 9.0 3 % Total Upholstery 123.9 53 % 142.6 48 % 142.0 47 % Total company $ 234.9 100 % $ 294.8 100 % $ 299.7 100 % Additional financial information about our operating segments can be found in Note 17 of the consolidated financial statements included in Item 8 of this report.
These products include roller & solar shades, drapery, roman shades and top treatments, hardware products, and soft goods such as duvet covers, bed skirts, bolsters and pillows. Manufacturing and Sourcing Mattress Fabrics Segment Our mattress fabrics segment operates four manufacturing plants, with two located in North Carolina (Stokesdale and High Point), one in St.
These products include roller & solar shades, drapery, roman shades and top treatments, hardware products, and soft goods such as duvet covers, bed skirts, bolsters and pillows. 7 Manufacturing and Sourcing Mattress Fabrics Segment Our mattress fabrics segment operates three manufacturing plants, with one located in North Carolina (Stokesdale), one in St. Jerome, Quebec, Canada, and one in Ouanaminthe, Haiti.
Our executive offices are located in High Point, North Carolina. Culp maintains an internet website at www.culp.com.
Our executive offices are located in High Point, North Carolina. 2 Culp maintains a corporate website at www.culp.com.
In fiscal 2019, we continued these initiatives by consolidating our weaving operations to one facility, our plant in Quebec, Canada, and expanding production of our sewn mattress covers in Haiti and China to meet customer demand in the growing boxed bedding market.
In fiscal 2019, we consolidated our weaving operations to one facility in Quebec, Canada, and expanded production of our sewn mattress covers in Haiti and China to meet customer demand in the growing boxed bedding market.
These pressures continued during fiscal 2022, with further increases in raw material costs, particularly during the second half of the year, due to the continued rise in oil prices and a higher demand environment.
Near the end of fiscal 2021, our raw material costs began to escalate primarily due to rising oil prices, a higher demand environment, and labor shortages. These pressures continued during fiscal 2022, with further increases in raw material costs, particularly during the second half of the year, due to the continued rise in oil prices and a higher demand environment.
This sales trend began to reverse during fiscal 2022, particularly during the second half of the year, as COVID-related travel and mask restrictions were lifted and consumers began to resume travel and leisure activities. Inflationary pressures also began to affect consumer spending during the second half of fiscal 2022.
This sales trend began to reverse during fiscal 2022, particularly during the second half of the year, as COVID-related travel and mask restrictions were lifted and consumers began to resume travel and leisure activities, and this reversal continued throughout fiscal 2023.
However, this sales trend began to reverse during fiscal 2022, particularly during the second half of the year, as COVID-related travel and mask restrictions were lifted and consumers began to resume travel and leisure activities. Inflationary pressures also affected consumer spending during the second half of fiscal 2022.
However, this sales trend began to reverse during fiscal 2022, particularly during the second half of fiscal 2022 and continuing throughout fiscal 2023, as COVID-related travel and mask restrictions were lifted and consumers began to resume travel and leisure activities.
Our facilities in China provide a base from which to access a variety of products, including certain fabrics (such as micro denier suedes and polyurethane fabrics) that are not produced anywhere within the U.S.
A large portion of our upholstery fabric products, as well as certain elements of our production processes, are being sourced from outside suppliers. Our facilities in China provide a base from which to access a variety of products, including certain fabrics (such as micro denier suedes and polyurethane fabrics) that are not produced anywhere within the U.S.
However, there can be no assurance that the costs associated with environmental matters will not increase in the future. Human Capital Our Employees As of the end of fiscal 2022, we employed 1,582 people, an increase of 152 employees as compared to the end of the prior fiscal year.
However, there can be no assurance that the costs associated with environmental matters will not increase in the future. Human C apital Our Employees As of the end of fiscal 2023, we employed 1,333 people, a decrease of 249 employees as compared to the end of the prior fiscal year.
After eight consecutive years of growth, sales declined in fiscal 2019 and fiscal 2020.
After eight consecutive years of growth, sales for the mattress fabrics segment declined in fiscal 2019 and fiscal 2020.
We employ the vast majority of our employees on a full-time basis. 12 The hourly employees at our manufacturing facility in Canada ( approximately 10 % of our workforce) are represented by a local, unaffiliated union. The collective bargaining agreement for these employees expires on February 1, 2023.
Approximately 478 employees work in the United States, and 855 are employed in international locations. We employ the vast majority of our employees on a full-time basis. The hourly employees at our manufacturing facility in Canada (approximately 11% of our workforce) are represented by a local, unaffiliated union. The collective bargaining agreement for these employees expires on February 1, 2026.
On May 1, 2022, the portion of the upholstery fabric backlog with confirmed shipping dates prior to June 6, 2022, was $15.7 million, compared with $17.2 million as of the end of fiscal 2021 (for confirmed shipping dates prior to June 7, 2021).
On April 30, 2023, the portion of the upholstery fabric backlog with confirmed shipping dates prior to June 5, 2023, was $10.6 million, compared with $15.7 million as of the end of fiscal 2022 (for confirmed shipping dates prior to June 6, 2022).
Net Sales by Geographic Area (dollars in thousands) Fiscal 2022 Fiscal 2021 Fiscal 2020 United States $ 204,454 69.3% $ 217,473 72.6% $ 189,073 73.8% North America (Excluding USA) (1) 39,256 13.3% 32,925 11.0% 27,637 10.8% Far East and Asia (2) 43,015 14.6% 43,764 14.6% 36,470 14.2% All other areas 8,114 2.8% 5,558 1.9% 2,986 1.2% Subtotal (International) $ 90,385 30.7% $ 82,247 27.4% $ 67,093 26.2% Total $ 294,839 100.0% $ 299,720 100.0% $ 256,166 100.0% (1) Of this amount, $33.5 million, $27.2 million, and $21.7 million are attributable to shipments to Mexico in fiscal 2022, 2021, and 2020, respectively.
Net Sales by Ge ographic Area (dollars in thousands) Fiscal 2023 Fiscal 2022 Fiscal 2021 United States $ 165,807 70.6% $ 204,454 69.3% $ 217,473 72.6% North America (Excluding USA) (1) 29,756 12.7% 39,256 13.3% 32,925 11.0% Far East and Asia (2) 31,339 13.3% 43,015 14.6% 43,764 14.6% All other areas 8,032 3.4% 8,114 2.8% 5,558 1.9% Subtotal (International) $ 69,127 29.4% $ 90,385 30.7% $ 82,247 27.4% Total $ 234,934 100.0% $ 294,839 100.0% $ 299,720 100.0% (1) Of this amount, $24.9 million, $33.5 million, and $27.2 million are attributable to shipments to Mexico in fiscal 2023, 2022, and 2021, respectively.
Economic downturns, increases in unemployment rates, and uncertainty about future health and economic prospects can affect consumer spending habits and demand for home furnishings, which reduces the demand for our products and therefore can cause a decline in our sales and earnings.
Economic downturns, higher unemployment rates, and uncertainty about future health and economic prospects can affect consumer spending habits and demand for home furnishings, which reduces the demand for our products and therefore can cause a decline in our sales and earnings. Sales of commercial furniture to businesses are also affected by these same factors.
Overview of Bedding Industry The bedding industry has contracted and expanded in recent years in accordance with the general economy, although traditionally the industry has been relatively mature and stable.
Overview of Be dding Industry The bedding industry has contracted and expanded in recent years in accordance with the general economy, and, most recently in connection with impacts from the COVID-19 pandemic, although traditionally the industry has been relatively mature and stable.
Product Design and Innovation Consumer tastes and preferences related to bedding, upholstered furniture, and window treatment products change over time. The use of new fabrics, creative designs, and special production finishes and technologies remains an important consideration for manufacturers and marketers to distinguish their products at retail and to capitalize on changes in preferred colors, patterns, textures, and performance properties.
The use of new fabrics, creative designs, and special production finishes and technologies remains an important consideration for manufacturers 8 and marketers to distinguish their products at retail and to capitalize on changes in preferred colors, patterns, textures, and performance properties.
The company has emphasized fabrics that have broad appeal at prices generally ranging from $1.50 to more than $10.00 per yard. 7 Upholstery Fabrics Segment Upholstery fabrics segment sales totaled 48% of our sales for fiscal 2022, compared with 47% of for fiscal 2021.
Upholstery Fabrics Segment Upholstery fabrics segment sales totaled 53% of our sales for fiscal 2023, compared with 48% of for fiscal 2022. The company has emphasized fabrics that have broad appeal at “good” and “better” prices, generally ranging from $3.00 to $16.00 per yard.
Employee Recruitment, Development, Engagement, and Wellness We strive to attract, recruit, and retain employees through competitive compensation and benefit programs that are aligned with those of comparable industries and in the geographic areas where our facilities are located, and in compliance with local regulatory requirements.
We also conduct regular training programs with our management and employee leaders to inform and refresh their knowledge about company policies and procedures pertaining to employment and human capital. 12 Employee Recruitment, Development, Engagement, and Wellness We strive to attract, recruit, and retain employees through competitive compensation and benefit programs that are aligned with those of comparable industries and in the geographic areas where our facilities are located, and in compliance with local regulatory requirements.
This increase in sales was driven by the consumer focus on the home environment and overall comfort, combined with our ability to service this demand through our global platform.
Sales increased significantly in fiscal 2021, as compared to fiscal 2020, driven by the consumer focus on the home environment and overall comfort during the COVID-19 pandemic, combined with our ability to service this demand through our global platform.
Throughout fiscal 2022, we maintained our sustained focus on product innovation, and our highly durable, stain resistant LiveSmart® performance fabrics, as well as our LiveSmart Evolve® performance plus sustainability fabrics, remained popular with both existing and new residential furniture customers.
Despite the industry softness in fiscal 2023, we maintained our sustained focus on product innovation, and our highly durable, stain resistant LiveSmart® performance fabrics, as well as our LiveSmart Evolve® performance plus sustainability fabrics, remained popular with both existing and new residential furniture customers. Demand for our hospitality/contract fabric business also remained solid for the year.
The division also sources products internally from Culp China, which is operated by our upholstery fabrics division, as well as from a supplier in Turkey, based on our own designs and production schedule.
Both of these facilities offer finished goods distribution capabilities, and the Stokesdale plant houses the division offices. The segment also sources mattress fabric products internally from Culp China, which is operated by our upholstery fabrics division, as well as from a supplier in Turkey, based on our own designs and production schedule.
Faux leathers Sueded or knitted base cloths which are overprinted with polyurethane, and composite products consisting of a base fabric that is coated with a top layer of polyurethane, which simulates the look and feel of leather.
The fabrics are typically plain or small jacquard designs, with some being printed. These are sometimes referred to as microdenier suedes. Faux leathers Sueded or knitted base cloths which are overprinted with polyurethane, and composite products consisting of a base fabric that is coated with a top layer of polyurethane, which simulates the look and feel of leather.
In general, sales of residential furniture are influenced significantly by the housing industry and by trends in home sales and household formations, while demand for commercial furniture generally reflects economic trends affecting businesses.
These market conditions, as well as the pace of recovery from these conditions, have been uneven in recent years. In general, sales of residential furniture are influenced significantly by the housing industry and by trends in home sales and household formations, while demand for commercial furniture generally reflects economic trends affecting businesses and office occupancy.
During fiscal 2022, sales increased slightly by 0.4%, reflecting generally solid demand for residential upholstery products for the first nine months of the year, offset by a significant drop in residential sales during the fourth quarter due to COVID-related shutdowns of our facilities in China throughout the month of April and, to a lesser extent, a slowdown in new business for the residential home furnishings industry during the fourth quarter.
This increase was offset by a significant drop in residential sales during the fourth quarter due to COVID-related shutdowns of our facilities in China throughout the month of April and, to a lesser extent, a slowdown in new business for the residential home furnishings industry during the fourth quarter.
This is due in part to the fact that a majority of bedding industry sales are replacement purchases, which are less volatile than sales based on economic growth and new household formations.
This is due in part to the fact that a majority of bedding industry sales are replacement purchases, which are less volatile than sales based on economic growth and new household formations. During the second half of fiscal 2022 and throughout fiscal 2023, the bedding industry experienced weakness in domestic mattress sales, with industry reports reflecting significant unit contraction.
Overview Culp manufactures, sources, and markets mattress fabrics and sewn covers used for covering mattresses and foundations and other bedding products; and upholstery fabrics, including cut and sewn kits, primarily used in the production of upholstered furniture.
The terms “Read Window Products” and “Read” refer to our wholly-owned subsidiary, Read Window Products, LLC. Over view Culp manufactures, sources, and markets mattress fabrics and sewn covers used for covering mattresses and foundations and other bedding products; and upholstery fabrics, including cut and sewn kits, primarily used in the production of upholstered furniture.
Overview of Residential and Commercial Furniture Industry Overall demand for our products depends upon consumer demand for furniture and bedding products, which is subject to variations in the general economy, including current inflationary pressures affecting consumer spending, the continued economic impact of the COVID-19 pandemic, and other geopolitical events.
Overview of Residential and C ommercial Furniture Industry Overall demand for our products depends upon consumer demand for furniture and bedding products, which is subject to variations in the general economy, including current inflationary pressures affecting consumer spending; declines in consumer confidence; the negative economic impact of potential additional surges of the coronavirus; and other geopolitical events, such as the ongoing Russia/Ukraine war.
The timing of the Chinese National Holiday in October and, to a larger extent, the Chinese New Year (which occurs in January or February each year), now have a more significant impact on upholstery sales than the U.S. holiday periods, often causing sales to be higher in advance of these Chinese holiday periods and sometimes lower during or immediately following the same periods.
The timing of the Chinese National Holiday in October and, to a larger extent, the Chinese New Year (which occurs in January or February each year), now have a more significant impact on upholstery sales than the U.S. holiday periods, often causing sales to be higher in advance of these Chinese holiday periods and sometimes lower during or immediately following the same periods (although notably this trend for the Chinese New Year holiday did not occur during fiscal 2023, with sales lower in advance of the holiday due to high customer inventory and reduced consumer demand, followed by an uptick in sales after the holiday as customer inventory levels began to normalize).
These fabrics are sold in roll form and as sewn mattress covers by the mattress fabrics segment, and in roll form and as cut and sewn kits by the upholstery fabrics segment. Our upholstery segment products also include window treatments and related products.
Produ cts As described above, our products include mattress fabrics and upholstery fabrics, which are our two identified operating segments. These fabrics are sold in roll form and as sewn mattress covers by the mattress fabrics segment, and in roll form and as cut and sewn kits by the upholstery fabrics segment.
Converted Suedes, pile and embroidered fabrics, and other specialty type products are sourced to offer diversity for higher end mattresses. Knitted fabric Various patterns and intricate designs produced on special-width circular knit machines utilizing a variety of synthetic and natural yarns. Knitted mattress fabrics have inherent stretching properties and spongy softness, which conforms well with layered foam packages.
Knitted fabric Various patterns and intricate designs produced on special-width circular knit machines utilizing a variety of synthetic and natural yarns. Knitted mattress fabrics have inherent stretching properties and spongy softness, which conforms well with layered foam packages. Sewn mattress covers Covers for bedding (primarily specialty beds), sewn from mattress fabrics produced by our facilities or sourced from others.
For fiscal 2022, sales declined compared to the prior year primarily due to industry weakness in domestic mattress industry sales, especially during the fourth quarter, along with some disruption from COVID-related shutdowns. This industry softness was driven by slowing retail demand, which we believe was mostly caused by inflationary pressures affecting consumer spending.
For fiscal 2022, sales declined slightly compared to the prior year primarily due to industry weakness in domestic mattress industry sales, especially during the fourth quarter, along with some disruption from COVID-related shutdowns.
This strategic approach has allowed us to limit our investment of capital in fixed assets and control the costs of our products, while continuing to leverage our design and finishing expertise, industry knowledge, and important relationships.
This strategic approach has allowed us to limit our investment of capital in fixed assets and control the costs of our products, while continuing to leverage our design and finishing expertise, industry knowledge, and important relationships. 4 After increasing in the two prior years, sales declined in fiscal 2020 due to the severe disruption from the COVID-19 pandemic during the fourth quarter.
We market cut and sewn fabric kits produced in these locations, as well as a variety of upholstery fabrics and cut and sewn kits sourced from third party producers, mostly in China and Vietnam.
From these locations, we market a variety of upholstery fabrics and cut and sewn kits sourced from third-party producers, mostly in China and Vietnam. We utilize these facilities for design, finishing, warehousing, quality control, and inspection operations related to these products. We previously produced cut and sewn fabric kits in Shanghai, China.
The majority of upholstery fabrics and materials used by our Read Window Products business to fabricate window treatments are customer-supplied. These materials are generally sourced by customers, and we also source a portion of other window treatment products such as hardware and roller shades, from outside suppliers in the U.S., Turkey, and China.
These materials are generally sourced by customers, and we also source a portion of other window treatment products such as hardware and roller shades, from outside suppliers in the U.S., Turkey, and China. Product Design and Innovation Consumer tastes and preferences related to bedding, upholstered furniture, and window treatment products change over time.
Woven dobbies Fabrics that use straight lines to produce geometric designs such as plaids, stripes, and solids in traditional and country styles. Woven on less complicated looms using a variety of weaving constructions and primarily synthetic yarns. Velvets Soft fabrics with a plush feel. Woven or knitted in basic designs, using synthetic yarns that are yarn dyed or piece dyed.
Woven on less complicated looms using a variety of weaving constructions and primarily synthetic yarns. Velvets Soft fabrics with a plush feel. Woven or knitted in basic designs, using synthetic yarns that are yarn dyed or piece dyed. Suedes Fabrics woven or knitted using microdenier polyester yarns, which are piece dyed and finished, usually by sanding.
Jerome, Quebec, Canada, and one in Ouanaminthe, Haiti. Over the past ten fiscal years, we made capital expenditures of approximately $69 million to consolidate our production facilities and to modernize both knit and weaving equipment, enhance and 8 provide knit and woven finishing capabilities, and expand capacity.
Over the past ten fiscal years, we made capital expenditures of approximately $67 million to consolidate our production facilities and to modernize both knit and weaving equipment, enhance and provide knit and woven finishing capabilities, and expand capacity. The result has been an increase in manufacturing efficiency and reductions in operating costs, as well as expanded product offerings and capacity.
However, these seasonality trends relate more to in-store retail sales, whereas the growth in online sales, which began prior to the COVID-19 pandemic and increased during the pandemic, appear to be somewhat less seasonal. Upholstery Fabrics Segment The upholstery fabrics business today is less seasonal than it once was.
However, these seasonality trends relate more to in-store retail sales and promotional events, whereas the growth in online sales, which began prior to the COVID-19 pandemic and increased during the pandemic, are less affected by in-store seasonality trends.
Upholstery Fabrics Segment Our major customers for upholstery fabrics are leading manufacturers of upholstered furniture, including Ashley, Flexsteel, Kuka, La-Z-Boy (La-Z-Boy Residential and England), Southern Furniture Industries (Fusion and Southern Motion), Sudair, and Violino. Major customers for the company’s fabrics for commercial furniture include HNI Corporation and Travel + Lesiure Co. (f/k/a Wyndham Destinations).
No customers within the mattress fabrics segment accounted for more than 10% of the company's consolidated sales in fiscal 2023. Upholstery Fabrics Segment Our major customers for upholstery fabrics are leading manufacturers of upholstered furniture, including Ashley, Flexsteel, Kuka, La-Z-Boy (La-Z-Boy Residential and England), Southern Furniture Industries (Fusion and Southern Motion), Sudair, and Violino.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf we cannot successfully recruit and retain key employees and skilled workers or if we experience the unexpected loss of those employees, our operations may be negatively affected. A shortage of qualified personnel, along with cost inflation, may require us to enhance our compensation in order to compete effectively in the hiring and retention of qualified employees.
Biggest changeWe may not be able to recruit and retain key employees and skilled workers in a competitive labor market. If we cannot successfully recruit and retain key employees and skilled workers or if we experience the unexpected loss of those employees, our operations may be negatively affected.
Interruptions in our ability to obtain raw materials or other required products or services from our outside suppliers on a timely and cost-effective basis, especially if alternative suppliers cannot be immediately obtained, could disrupt our production and damage our financial results. Write-offs or write-downs of assets would result in a decrease in our earnings and shareholders’ equity.
Interruptions in our ability to obtain raw materials or other required products or services from our outside suppliers on a timely and cost-effective basis, especially if alternative suppliers cannot be immediately obtained, could disrupt our production and damage our financial results. 18 Write-offs or write-downs of assets would result in a decrease in our earnings and shareholders’ equity.
Material changes in these policies could increase our tax obligations, require us to source materials from different regions, or increase prices to customers, which could adversely affect sales. Any significant change in U.S. policy related to imported products could have a material adverse effect on our business and financial results.
Material changes in these policies could increase our tax obligations, require us to source materials from different regions, or increase prices to customers, which could adversely affect sales. Any significant change in U.S. trade or tax policy related to imported products could have a material adverse effect on our business and financial results.
Any of such future actions could result in charges that could have an adverse effect on our financial condition and results of operations, and there is no assurance that future write-downs of fixed assets, goodwill, or other intangible assets will not occur if business conditions were to deteriorate.
Any of such future actions could result in charges that could have an adverse effect on our financial condition and results of operations, and there is no assurance that future write-downs of fixed assets or other intangible assets will not occur if business conditions were to deteriorate.
Any of the risks associated with our Chinese 18 operations and sources could cause unanticipated increases in operating costs or disruptions in business, which could negatively affect our ultimate financial results. We may have difficulty managing the outsourcing arrangements being used for products and services.
Any of the risks associated with our Chinese operations and sources could cause unanticipated increases in operating costs or disruptions in business, which could negatively affect our ultimate financial results. We may have difficulty managing the outsourcing arrangements being used for products and services.
Our available cash, cash equivalents, and cash flow from operations have been adequate to finance our operations and capital requirements in recent years. However, if we experience a sustained decline in revenue, there may be periods in which we may require additional external funding to support our operations.
Our available cash, cash equivalents, and cash flow from operations have been adequate to finance our operations and capital requirements in recent years. However, if we experience a sustained decline in 21 revenue, there may be periods in which we may require additional external funding to support our operations.
We believe the domestic mattress industry and, in turn, our business, began to realize some benefits from these duties during the second half of fiscal 2021 and continuing into fiscal 2022.
We believe the domestic mattress industry and, in turn, our business, began to realize some benefits from these duties during the second half of fiscal 2021 and continuing into fiscal 2022 and fiscal 2023.
Changes in the value of the U.S. dollar versus other currencies can affect our financial results because a significant portion of our operations are located outside the United States.
Additionally, changes in the value of the U.S. dollar versus other currencies can affect our financial results because a significant portion of our operations are located outside the United States.
At the same time, we experienced a rapid decline in demand as customers and retail stores began closing or substantially limiting their operations.
At the same time, we experienced a rapid decline in demand as customers and retail stores began closing or substantially 15 limiting their operations.
In addition, operations and sourcing in foreign areas are subject to the risk of changing local governmental rules, taxes, changes in import rules or customs, tariffs, shipping rates, potential political unrest and instability, pandemic-related closure rules, or other threats that could disrupt or increase the costs of operating in foreign areas or sourcing products overseas.
In addition, operations and sourcing in foreign areas are subject to the risk of changing local governmental rules, taxes, changes in import rules or customs, import restrictions, tariffs, shipping rates, potential political unrest and instability, coronavirus or other pandemic-related closure rules, or other threats that could disrupt or increase the costs of operating in foreign areas or sourcing products overseas.
Many countries, including the countries in which we operate, as well as state and local governmental authorities, have taken various actions to mitigate the spread of COVID-19, including mandated closures of businesses, stay-at-home orders, quarantine and isolation requirements, travel restrictions, border closings, restrictions on public gatherings, social distancing measures, occupancy limits, and other safety measures.
Many countries, including the countries in which we operate, as well as state and local governmental authorities, took various actions to mitigate the spread of COVID-19, including mandated closures of businesses, stay-at-home orders, quarantine and isolation requirements, travel restrictions, border closings, restrictions on public gatherings, social distancing measures, occupancy limits, and other safety measures.
ITEM 1A. RISK FACTORS Our business is subject to a variety of risks and uncertainties. In addition to the matters described above under “Cautionary Statement Concerning Forward-Looking Information,” set forth below are some of the risks and uncertainties that could cause a material adverse change in our results of operations, financial condition, or future prospects.
ITEM 1A. RI SK FACTORS Our business is subject to a variety of risks and uncertainties. In addition to the matters described above under “Cautionary Statement Concerning Forward-Looking Information,” set forth below are some of the risks and uncertainties that could cause a material adverse change in our results of operations, financial condition, or future prospects.
Furthermore, the impact of the COVID-19 pandemic may also exacerbate other risks discussed in this Item 1A – Risk Factors, any of which could have a material adverse effect on our operations.
Furthermore, the impact of additional surges in COVID-19 may also exacerbate other risks discussed in this Item 1A – Risk Factors, any of which could have a material adverse effect on our operations.
However, during fiscal 2022, our upholstery fabrics business was materially affected by COVID-19 related shutdowns of our sourcing partners and customers in Vietnam throughout most of the second quarter, and our operations in China were shut down during the last month of the fourth quarter of fiscal 2022, which prevented us from shipping goods in both our residential upholstery fabrics business and our sewn mattress cover business.
However, during fiscal 2022, our upholstery fabrics business was materially affected by COVID-19 related shutdowns of our sourcing partners and customers in Vietnam throughout most of the second quarter, and our operations in China were shut down during the last month of the fourth quarter of fiscal 2022 and continuing to some extent during the first month of fiscal 2023, which prevented us from shipping goods in both our residential upholstery fabrics business and our sewn mattress cover business.
At this time, we cannot reasonably estimate the ongoing impact of the COVID-19 pandemic on our business or on our future financial or operational results; however, the disruption could have a material adverse effect on our business, financial condition, results of operations, and cash flows over time.
At this time, we cannot reasonably estimate the impact of such potential future COVID-19 surges on our business or on our future financial or operational results; however, the disruption could have a material adverse effect on our business, financial condition, results of operations, and cash flows over time.
While a number of these restrictions have been lifted as conditions have improved, they have adversely affected, and could continue to adversely affect, our business, results of operations, financial position, and cash flows. Due to government-mandated closure requirements near the end of March 2020, we shut down our facilities in Canada and Haiti for several weeks.
While these restrictions have now been lifted as conditions have improved, the restrictions adversely affected our business, results of operations, financial position, and cash flows. Due to government-mandated closure requirements near the end of March 2020, we shut down our facilities in Canada and Haiti for several weeks.
In addition, responding to the ongoing pandemic could divert management’s attention from our key strategic priorities, increase costs as we prioritize the health and safety of our employees and customers, cause us to reduce, delay, alter, or abandon strategic initiatives that may otherwise increase our long-term value, and otherwise continue to disrupt our business operations.
In addition, responding to future case surges or restrictions could divert management’s attention from our key strategic priorities, increase costs as we prioritize the health and safety of our employees and customers, cause us to reduce, delay, alter, or abandon strategic initiatives that may otherwise increase our long-term value, and otherwise disrupt our business operations.
These pressures continued during fiscal 2022, with further increases in raw material costs, particularly during the second half of the year, due to the continued rise in oil prices and a higher demand environment. These pressures may continue to drive additional increases in raw material prices in the future.
These pressures continued during fiscal 2022, with further increases in raw material costs, particularly during the second half of the year, due to the continued rise in oil prices and a higher demand environment.
In the upholstery fabrics segment, La-Z-Boy Incorporated accounted for approximately 13% of consolidated net sales during fiscal 20 2 2 , and several other large furniture manufacturers comprised a significant portion of sales.
In the upholstery fabrics segment, La-Z-Boy Incorporated accounted for approximately 15% of consolidated net sales during fiscal 2023, and several other large furniture manufacturers comprised a significant portion of sales.
We have been a target of cybersecurity attacks in the past, and while such attacks have not resulted in a material impact on our operations, business, customer relationships, or reputation, such attacks could in the future. In addition, due to the COVID-19 pandemic, we have permitted certain employees to work from home from time to time.
We have been a target of cybersecurity 20 attacks in the past, and while such attacks have not resulted in a material impact on our operations, business, customer relationships, or reputation, such attacks could in the future. In addition, we permit certain employees to work from home from time to time.
The global spread of COVID-19 has negatively affected the global and U.S. economy, severely disrupted global supply chains, and created significant volatility and disruption in financial markets, all of which have negatively affected, and continue to negatively affect, the bedding and home furnishings industries, our customers and suppliers, and our business.
The COVID-19 pandemic negatively affected the global and U.S. economy, severely disrupted global supply chains, and created significant volatility and disruption in financial markets, all of which negatively affected the bedding and home furnishings industries, our customers and suppliers, and our business.
The U.S. government has imposed certain tariffs on imports from various countries, including China, where a significant amount of our products is produced. In the future, the U.S. 17 Government may consider imposing additional tariffs or extending the timeline for continuation of existing tariffs .
Many of our products are manufactured or sourced outside of the United States. The U.S. government has imposed certain tariffs on imports from various countries, including China, where a significant amount of our products is produced. In the future, the U.S. Government may consider imposing additional tariffs or extending the timeline for continuation of existing tariffs.
We depend upon outside suppliers for most of our raw material needs, and we rely upon outside suppliers for component materials such as yarn and unfinished fabrics, as well as for certain services such as finishing and weaving.
We depend upon outside suppliers for most of our raw material needs, and we rely upon outside suppliers for component materials such as yarn, unfinished fabrics, and cut and sewn upholstery kits and mattress covers, as well as for certain services such as finishing and weaving.
Energy costs have varied significantly during recent fiscal years and remain a volatile element of our costs. Increases in energy costs could have a negative effect on our earnings. Business difficulties or failures of large customers could result in a decrease in our sales and earnings. We currently have several customers that account for a substantial portion of our sales.
Energy costs have varied significantly during recent fiscal years and remain a volatile element of our costs. Increases in energy costs could have a negative effect on our earnings. 19 Business difficulties or failures of large customers could result in a decrease in our sales and earnings.
We are unable to predict how long these trends will last, or to what extent the COVID-19 pandemic may affect the economic and purchasing cycle for home furnishing products (and therefore affect demand for our products) over the short and long term.
We are unable to predict how long these trends will last, or to what extent additional surges of the coronavirus or other geopolitical events may affect the economic and purchasing cycle for home furnishing products (and therefore affect demand for our products) over the short and long term.
The ongoing COVID-19 pandemic, including additional surges in the number of cases, and any additional preventative or protective actions that governmental authorities or we may take in response to the pandemic, may continue to have an adverse effect on our business or the business of our customers, suppliers, or distribution channels, including additional business shutdowns, reduced operations, restrictions on shipping or installing products, reduced consumer demand, reduced availability and/or higher pricing of materials, or the ability of our customers to make payments.
While the World Health Organization has now declared an official end to the COVID-19 global health emergency, future surges in the number of COVID-19 cases and preventative or protective actions that governmental authorities or we may take in response to such surges may have an adverse effect on our business or the business of our customers, suppliers, or distribution channels, including additional business shutdowns, reduced operations, restrictions on shipping or installing products, reduced consumer demand, reduced availability and/or higher pricing of materials, or the ability of our customers to make payments.
Although we continue to implement strong physical and cybersecurity measures to ensure that our business operations remain functional and to ensure uninterrupted service to our customers, our systems and our operations remain vulnerable to cyberattacks and other disruptions due to the fact that more employees may be working remotely, and we cannot be certain that our mitigation efforts will be effective. 20 We may not be able to recruit and retain key employees and skilled workers in a competitive labor market.
Although we continue to implement strong physical and cybersecurity measures to ensure that our business operations remain functional and to ensure uninterrupted service to our customers, our systems and our operations remain vulnerable to cyberattacks and other disruptions due to the fact that employees may be working remotely, and we cannot be certain that our mitigation efforts will be effective.
COVID-19 may also increase the risk that certain senior management executives or a member of the board of directors could become ill, causing them to be incapacitated or otherwise unable to perform their duties for an extended absence.
Losing the services of one or more key members of our management team or other key personnel could adversely affect our operations. COVID-19 may also increase the risk that certain senior management executives or a member of the board of directors could become ill, causing them to be incapacitated or otherwise unable to perform their duties for an extended absence.
Additional risks and uncertainties not presently known to us or not presently deemed material by us also may materially adversely affect our business, financial condition, or results of operations in future periods.
Additional risks and uncertainties not presently known to us or not presently deemed material by us also may materially adversely affect our business, financial condition, or results of operations in future periods. Macroeconomic, Market, and Strategic Risks Continued economic and industry uncertainty could negatively affect our sales and earnings.
Increases in energy costs increase our operating costs and could adversely affect earnings. Higher prices for electricity, natural gas, and fuel increase our production and shipping costs.
However, the pressures that affect raw material costs may drive additional increases in raw material prices in the future. Increases in energy costs increase our operating costs and could adversely affect earnings. Higher prices for electricity, natural gas, and fuel increase our production and shipping costs.
Any of these claims, even if without merit, could result in costly litigation or further divert management's attention and resources. 16 The impact of the COVID-19 pandemic continues to evolve and depends on factors beyond our knowledge or control, including the duration and severity of the outbreak ; actions taken to contain its spread and mitigate the public health and economic effects ; vaccine availability and effectiveness within the markets in which we operate ; the impact on global supply chain conditions ; employee absenteeism and labor shortages; and the short- and long-term disruption to the global economy, consumer confidence, demand for home furnishings products, unemployment, and the financial health of our customers, suppliers, and distribution channels.
The potential for future surges in the number of COVID-19 cases and the impact of such surges on our business depends on factors beyond our knowledge or control, including the duration and severity of such surges; actions taken to contain spread of the virus and mitigate the public health and economic effects; vaccine availability and effectiveness within the markets in which we operate; the impact on global supply chain conditions; employee absenteeism and labor shortages; and the short- and long-term disruption to the global economy, consumer confidence, demand for home furnishings products, unemployment, and the financial health of our customers, suppliers, and distribution channels.
As of May 1, 2022, we had approximately $38 million in combined total borrowing availability under our domestic credit facility and our China credit facility.
As of April 30, 2023, we had approximately $32.6 million in combined total borrowing availability under our domestic credit facility and our China credit facility.
In addition, if in the future there is an outbreak of another highly infectious disease or other health concern or epidemic, we may be subject to similar risks as those currently posed by COVID-19. Continued economic and industry uncertainty could negatively affect our sales and earnings.
In addition, if in the future there is an outbreak of another highly infectious disease or other health concern or epidemic, we may be subject to similar risks as those faced during the COVID-19 pandemic.
However, this trend began to reverse during fiscal 2022, particularly during the second half of the year, as COVID-related travel and mask restrictions were lifted and consumers began to resume travel and leisure activities. Inflationary pressures also began to affect consumer spending during the second half of fiscal 2022.
However, this trend began to reverse during fiscal 2022, particularly during the second half of the year, as COVID-related travel and mask restrictions were lifted and consumers began to resume travel and leisure activities. We believe the trend of increased consumer discretionary spending on travel, leisure, and entertainment, and away from home goods, continued throughout fiscal 2023.
Goodwill and other intangible assets must be tested at least annually for impairment or whenever events or changes in circumstances indicate that the carrying value of the asset may not be recovered.
ASC Topic 350 establishes an impairment model for indefinite-lived intangible assets, such as our tradename, which must be tested at least annually for impairment or whenever events or changes in circumstances indicate that the carrying value of the asset may not be recovered.
For example, o n June 25, 2022, a major customer and its affiliates associated with our mattress fabrics segment announced that they filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code. See Note 4 of the consolidated financial statements for further details regarding this filing and its potential impact on our trade accounts receivable.
For example, on June 25, 2022, a major customer and its affiliates associated with our mattress fabrics segment announced that they filed voluntary petitions for reorganization under Chapter 11 of the U.S.
Also, the wide range of product offerings in our business can make it more difficult to differentiate our products through design, styling, finish, and other techniques.
Also, the wide range of product offerings in our business can make it more difficult to differentiate our products through design, styling, finish, and other techniques. The global COVID-19 pandemic significantly and adversely affected, and may again adversely affect, our business, financial position, results of operations, and cash flows.
Therefore, our business is continually subject to the risk of changes in Chinese laws and regulations that could have an adverse effect on our suppliers and manufacturing operations. Any changes in policies governing tariffs, imports and exports, taxation, inflation, environmental regulations, foreign currency exchange rates, the labor market, property, and financial regulations could have an adverse effect on our business.
Any changes in policies governing tariffs, imports and exports, taxation, inflation, economic sanctions and export controls, environmental regulations, foreign currency exchange rates, the labor market, property, network security, intellectual property, and financial regulations could have an adverse effect on our business.
Also, rules and restrictions regarding the importation of fabrics and other materials, including custom duties, tariffs, quotas, banned substances, and other regulations, are continually changing. Environmental laws, labor laws, tax laws and regulations (including, without limitation, the Global Intangible Low Taxed Income (“GILTI”) tax provisions), data privacy laws, and other regulations continually affect our business.
Environmental laws, labor laws, tax laws and regulations (including, without limitation, the Global Intangible Low Taxed Income (“GILTI”) tax provisions), data privacy laws, and other regulations continually affect our business.
Our business faces several risks associated with doing business in China We source a variety of fabrics from a limited number of strategic suppliers in China, and we operate two upholstery manufacturing facilities and three warehouse facilities in Shanghai, China. The Chinese economy is characterized by extensive state ownership, control, and regulation.
Our business faces several risks associated with doing business in China We source a variety of fabrics, as well as cut and sewn upholstery kits and sewn mattress covers, from a limited number of strategic suppliers in China. We also operate two upholstery manufacturing facilities and two warehouse facilities in Shanghai, China.
In the event we require additional liquidity from our lenders that exceeds the availability under our credit facilities at such time, such funds may not be available to us.
The amount available under this facility is limited by a borrowing base consisting of certain eligible accounts receivable and inventory of the company. In the event we require additional liquidity from our lenders that exceeds the availability under our credit facilities at such time, such funds may not be available to us.
See notes 8 and 9 of the notes to the consolidated financial statements for further details of our assessments of impairment, conclusions reached, and the performance of our quantitative tests. Changes in the price, availability, and quality of raw materials could increase our costs or cause production delays and sales interruptions, which would result in decreased earnings.
Changes in the price, availability, and quality of raw materials could increase our costs or cause production delays and sales interruptions, which would result in decreased earnings.
In addition, changes in the political climate or trade policy of the United States, such as increased duties, tariffs, or restrictions on Chinese imports, may adversely affect our business, and geo-political pressures associated with the COVID-19 pandemic may continue to introduce additional uncertainty, including with respect to tariffs and freight.
In addition, changes in the political climate or trade policy of the United States, such as increased duties, tariffs, or U.S. restrictions on Chinese imports, such as the UFLPA, may adversely affect our business.
We rely on outside sources for various products and services, including yarn and other raw materials, greige (unfinished) fabrics, finished fabrics, and services such as weaving and finishing. Increased reliance on outsourcing lowers our capital investment and fixed costs, but it decreases the amount of control that we have over certain elements of our production capacity.
Increased reliance on outsourcing lowers our capital investment and fixed costs, but it decreases the amount of control that we have over certain elements of our production capacity.
In June of 2022, we entered into an amended and restated credit agreement with respect to our domestic 21 credit facility, which provides for a revolving credit facility of up to $40 million, secured by a lien on the company’s assets, where the borrowing availability is determined based on certain eligible accounts receivable and inventory of the company.
In January of 2023, we entered into a Second Amended and Restated Credit Agreement with respect to our domestic credit facility, which provides for a revolving credit facility up to a maximum principal amount of $35.0 million, secured by a lien on the company's assets.
Overall demand for our products depends upon consumer demand for furniture and bedding products, which is subject to cyclical variations in the general economy, including the current and evolving negative economic impact of rising fuel prices, inflation, the Russia-Ukraine war, and the COVID-19 pandemic.
Overall demand for our products depends upon consumer demand for furniture and bedding products, which is subject to cyclical variations in the general economy, including current inflationary pressures affecting consumer spending, declines in overall consumer confidence, recession and fears of recession, the negative economic impact of potential additional surges of the coronavirus, and other geopolitical events, such as the ongoing Russia/Ukraine war.
Any of these risks, including without limitation civil unrest in Haiti, could cause disruption at our manufacturing or distribution facilities, or at the facilities of our suppliers and distribution channels, which could make servicing our customers more difficult and could reduce our sales, earnings, or both in the future.
Any of these risks, including without limitation civil unrest or instability in Haiti, China, or other countries where we operate, could cause disruption at our manufacturing or distribution facilities, or at the facilities of our suppliers and distribution channels, which could make servicing our customers more difficult and could reduce our sales, earnings, or both in the future. 16 Operational Risks Our business may be adversely affected by increased tariffs or other changes in U.S. trade policy related to imported products, as well as violations of existing trade policies.
The company has long-lived assets, primarily consisting of property, plant and equipment, goodwill, and other intangible assets. ASC Topic 360 establishes an impairment accounting model for long-lived assets such as property, plant, and equipment and requires the company to assess for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recovered.
The company has assets, primarily consisting of property, plant and equipment, right of use assets, inventory, and intangible assets, that may be subject to write-offs or write-downs. ASC Topic 360 establishes an impairment accounting model for long-lived assets, including property, plant, and equipment, right of use assets, and finite-lived intangible assets such as customer relationships and our non-compete agreement.
In the mattress fabrics segment, several large bedding manufacturers have large market shares and comprise a significant portion of our mattress fabric sales, with Serta Simmons Holdings, LLC accounting for approximately 11% of consolidated net sales in fiscal 2022. These include sales to customers who are 19 also subcontractors for Serta Simmons Holding, LLC.
We currently have several customers that account for a substantial portion of our sales. In the mattress fabrics segment, several large bedding manufacturers have large market shares and comprise a significant portion of our mattress fabric sales.
In addition, we are and will continue to be dependent upon our senior management team and other key personnel. Losing the services of one or more key members of our management team or other key personnel could adversely affect our operations.
A shortage of qualified personnel, along with cost inflation, may require us to enhance our compensation in order to compete effectively in the hiring and retention of qualified employees. In addition, we are and will continue to be dependent upon our senior management team and other key personnel.
Removed
Macroeconomic, Market, and Strategic Risks The global COVID-19 pandemic has significantly and adversely affected, and may continue to adversely affect, our business, financial position, results of operations, and cash flows.
Added
Inflationary pressures also began to affect consumer spending during the second half of fiscal 2022 and continuing throughout fiscal 2023.
Removed
Also, while we believe the employee safety measures we have implemented or others we may take in the future are temporary, they may continue until after the pandemic is contained and could amplify existing risks or introduce new risks that could adversely affect our business, including, but not limited to, risks related to internal controls and cybersecurity, and risks relating to employee willingness to work.
Added
We did not experience additional closures of any of our operations, or any material closures of the operations of our suppliers, during the remainder of fiscal 2023.
Removed
Furthermore, these safety measures may not be successful in preventing the spread of the virus among our employees, and we could face litigation or other claims related to unsafe working conditions, inadequate protection of our employees, or other similar or related claims.
Added
Specifically with respect to sourcing products and raw materials from third-party suppliers in China, our ability to timely or successfully import such products or products made with such raw materials may be adversely affected by changes in U.S. laws. For example, the U.S.
Removed
Operational Risks Our business may be adversely affected by increased tariffs or other changes in U.S. policy related to imported products, as well as violations of existing trade policies. Many of our products are manufactured or sourced outside of the United States.
Added
Government has taken several steps to address forced labor concerns in the Xinjiang Uyghur Autonomous Region of China ("XUAR"), including sanctions on specific entities and individuals; withhold release orders ("WROs") issued by U.S.
Removed
As a result of our impairment assessment conducted during the third quarter of fiscal 2020 and our annual impairment assessment conducted during the fourth quarter of fiscal 2020, we recorded asset impairment charges associated with our goodwill and tradenames totaling $33.9 million during the fiscal 2020 year.
Added
Customs and Border Protection ("CBP") that prohibit the entry of imports of certain items from XUAR; and the Uyghur Forced Labor Prevention Act ("UFLPA"), which went into effect in June 2022 and imposes a presumptive ban on the import of goods to the U.S. that are made, wholly or in part, in the XUAR or by persons that participate in certain programs in the XUAR that entail the use of forced labor.
Removed
Of the total $33.9 million asset impairment charges, $27.2 million and $6.7 million pertained to goodwill and tradenames, respectively. Due to the asset impairment charge of $27.2 million associated with our goodwill, no goodwill was reported on our Consolidated Balance Sheet as of the end of fiscal 2020, 2021, or 2022.
Added
CBP 17 has published both a list of entities that are known to utilize forced labor and a list of commodities that are most at risk, such as cotton, tomatoes and silica-based products. The UFLPA specifically targets cotton and the apparel and textile industries as high-priority sectors for enforcement.
Removed
Based on the information available to us at this time, we expect that this customer and its affiliates will continue to conduct normal business operations pending the reorganization, but a business failure or loss of this customer and its affiliates could cause a decrease in our sales and an adverse effect on our earnings.
Added
None of our Chinese suppliers are located in the XUAR, and we prohibit our suppliers from doing business with or sourcing inputs from any company or entity that is restricted under U.S. or other applicable law.
Removed
Where possible, we have permitted work-from-home arrangements for certain employees in order to limit the number of people at our facilities due to the COVID-19 pandemic.
Added
However, as a result of the UFLPA and WROs, products we import into the U.S. could be held for inspection by CBP based on a suspicion that such products or inputs used in such products originated from the XUAR or that they may have been produced by Chinese suppliers accused of participating in forced labor, pending our providing satisfactory evidence to the contrary.
Removed
The effects of stay-at-home orders and our work-from-home policies may negatively affect productivity and disrupt our business, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on our ability to conduct our business in the ordinary course.
Added
During fiscal 2023, we were subjected to a limited number of such CBP detentions and were successful in submitting satisfactory supply chain evidence to result in the release of all such detained good by CBP. These detentions have not resulted in any material impact on our business, supply chain, customer relationships, or reputation.
Added
However, future detentions could result in unexpected (i) delays or rejections of products scheduled for delivery to us, which could in turn affect the timing or our ability to delivery products to our customers; (ii) supply chain disruptions and increased operating costs; (iii) damage to our customer relationships; and/or (iv) negative publicity that harms our reputation, any of which could have a material impact on our business and negatively affect our ultimate financial results.
Added
The Chinese economy is characterized by extensive state ownership, control, and regulation, and the political, legal, and economic climate in China is fluid and unpredictable. Therefore, our business is continually subject to the risk of changes in Chinese laws and regulations that could have an adverse effect on our suppliers and manufacturing operations.
Added
Our ability to operate in China has also been adversely affected by the COVID-19 pandemic, and may in the future be negatively affected by additional surges in the coronavirus or other diseases.
Added
For example, during the COVID-19 pandemic, China from time to time enforced broad lockdowns, which affected our ability to timely produce and ship products and affected the ability of our third-party suppliers and their supply chain to timely deliver products and materials.
Added
We rely on outside sources for various products and services, including yarn and other raw materials, greige (unfinished) fabrics, finished fabrics, cut and sewn upholstery kits, sewn mattress covers, and services such as weaving and finishing.
Added
It requires the company to assess these assets for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recovered. In accordance with ASC Topic 330, management continuously examines inventory to determine if there are indicators that the carrying value exceeds its net realizable value.
Added
Experience has shown that the most significant of such indicators are the age of the inventory and planned discontinuances of certain patterns.
Added
As a result of inventory impairment assessments conducted during fiscal 2023, we incurred non-cash inventory charges totaling $5.8 million, which represents a $2.9 million impairment charge associated with our mattress fabrics segment; a total of $2.8 million related to markdowns of inventory in both segments that were estimated based on our policy for aged inventory; and $98,000 for the loss on disposal and markdowns of inventory related to the exit of our cut and sewn upholstery fabrics operation located in Shanghai, China.
Added
We incurred non-cash inventory charges of $1.9 million and $882,000 during fiscal 2022 and 2021, respectively, which represent markdowns of inventory in both segments that were based on our policy of aged inventory.
Added
See Notes 5, 7, and 9 of the consolidated financial statements for further details of our assessments of impairment, conclusions reached, and the performance of our quantitative tests. Write-offs and write-downs of our assets, including inventory, result in an immediate charge to our earnings, and can have a material adverse effect on our operating results and financial condition.
Added
During fiscal 2023, the cost of raw materials began to decline during the first half of the year due to lower oil prices and slowing global demand, but the higher costs and lower availability of labor remained challenging throughout the year. Raw material costs were relatively stable during the second half of fiscal 2023.
Added
Although no mattress fabrics customers accounted for more than 10% of our consolidated net sales in fiscal 2023, in many recent years we have had one or more customers who did.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeIn the upholstery fabrics segment, we have the ability to source upholstery fabric from outside suppliers to meet current and expected demand trends and further increase our output of finished goods. This ability to source upholstery fabric is part of our long-term strategy to have a low-cost platform that is scalable, but not capital intensive.
Biggest changeThis ability to source upholstery fabric is part of our long-term strategy to have a low-cost platform that is scalable, but not capital intensive. In the mattress fabrics segment, we believe we have sufficient capacity to meet current and expected demand trends.
Jerome, Quebec, Canada Warehouse 46,113 2023 Ouanaminthe, Haiti Manufacturing 80,000 2025 (2) Ouanaminthe, Haiti Manufacturing 40,000 2028 (2) ● Upholstery Fabrics: Burlington, North Carolina Finished goods distribution 132,000 2028 Burlington, North Carolina Design center 13,750 2026 Knoxville, Tennessee Manufacturing and offices 37,700 2033 Shanghai, China Manufacturing, warehouse, offices 68,677 2024 Shanghai, China Manufacturing, warehouse, offices 89,857 2024 Shanghai, China Warehouse and offices 89,861 2024 Shanghai, China Warehouse 64,583 2024 Shanghai, China Warehouse 48,610 2024 Ouanaminthe, Haiti Manufacturing 90,000 2029 (2) (1) Includes all options to renew, except as noted in footnote 2 below.
Jerome, Quebec, Canada Warehouse 46,113 2026 Ouanaminthe, Haiti Manufacturing 80,000 2025 (2)(3) Ouanaminthe, Haiti Manufacturing 40,000 2028 (2)(4) ● Upholstery Fabrics: Burlington, North Carolina Finished goods distribution 132,000 2028 Burlington, North Carolina Design center 13,750 2026 Knoxville, Tennessee Manufacturing and offices 37,700 2033 Shanghai, China Manufacturing, warehouse, offices 68,677 2024 Shanghai, China Manufacturing, warehouse, offices 89,857 2024 Shanghai, China Warehouse and offices 89,861 2024 Shanghai, China Warehouse 64,583 2024 (1) Includes all options to renew, except as noted in footnote 2 below.
Ft.) Expiration of Lease (1) ● Administrative: High Point, North Carolina Upholstery fabric division offices and corporate headquarters 36,643 2034 High Point, North Carolina Design and innovation campus, showrooms, and office space 21,261 2043 ● Mattress Fabrics: Stokesdale, North Carolina Manufacturing and headquarters office 299,163 Owned Stokesdale, North Carolina Distribution center 220,222 Owned High Point, North Carolina Manufacturing 63,522 2029 High Point, North Carolina Warehouse and offices 65,886 2023 (2) St.
Ft.) Expiration of Lease (1) ● Administrative: High Point, North Carolina Upholstery fabric division offices and corporate headquarters 36,643 2034 High Point, North Carolina Design and innovation campus, showrooms, and office space 21,261 2043 ● Mattress Fabrics: Stokesdale, North Carolina Manufacturing and headquarters office 299,163 Owned Stokesdale, North Carolina Distribution center 220,222 Owned St.
ITEM 2. PROPERTIES As of the end of fiscal 2022 (May 1, 2022), we leased our corporate headquarters and a design and innovation campus located in High Point, NC. In addition, we owned or leased seventeen facilities associated with our mattress and upholstery fabrics operations. The following is a list of our administrative and production facilities.
ITEM 2. P ROPERTIES As of the end of fiscal 2023 (April 30, 2023), we leased our corporate headquarters and a design and innovation campus located in High Point, North Carolina. In addition, we owned or leased thirteen facilities associated with our mattress and upholstery fabrics operations. The following is a list of our administrative and production facilities.
In the mattress fabrics segment, we believe we have sufficient capacity to meet current and expected demand trends. We also have the ability to source additional mattress fabrics from outside suppliers to further increase our ultimate output of finished goods. 23
We also have the ability to source additional mattress fabrics from outside suppliers to further increase our ultimate output of finished goods. 23
(2) These lease agreements have an unspecified number of renewal options available, and the year listed above is the expiration of the current lease term. We believe that our facilities are in good condition, well-maintained, suitable, and adequate for present utilization.
(2) These lease agreements have an unspecified number of renewal options available, and the year listed above is the expiration of the current lease term.
Added
(3) Of this 80,000 square feet, approximately 40,000 square feet of this facility is currently being utilized by our upholstery fabrics segment to produce cut and sewn kits as part of our Haiti rationalization strategy that included the relocation our upholstery fabrics operation to our mattress fabrics facilities and the termination of a separately leased upholstery fabrics facility in Ouanaminthe, Haiti.
Added
(4) Of this 40,000 square feet, approximately 15,000 square feet of this facility is currently being utilized by our upholstery fabrics segment to produce cut and sewn kits as part of our Haiti rationalization strategy that included the relocation of our upholstery fabrics operation to our mattress fabrics facilities and the termination of a separately leased upholstery fabrics facility in Ouanaminthe, Haiti.
Added
We believe that our facilities are in good condition, well-maintained, suitable, and adequate for present utilization. In the upholstery fabrics segment, we have the ability to source upholstery fabric from outside suppliers to meet current and expected demand trends and further increase our output of finished goods.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+1 added−2 removed1 unchanged
Biggest changeBox 505000 Louisville, KY 40233 Overnight correspondence should be sent to: Computershare 462 South 4 th Street, Suite 1600 Louisville, KY 40202 (800) 254-5196 (781) 575-2879 (Foreign shareholders) www.computershare.com/investor Stock Listing Culp, Inc. common stock is traded on the New York Stock Exchange (NYSE) under the symbol CULP.
Biggest changeCanton, MA 02021 (800) 254-5196 (781) 575-2879 (Foreign shareholders) www.computershare.com/investor Stock Listing Culp, Inc. common stock is traded on the New York Stock Exchange (NYSE) under the symbol CULP. As of April 30, 2023, Culp, Inc. had approximately 3,239 shareholders based on the number of holders of record and an estimate of individual participants represented by security position listings.
Sales of Unregistered Securities There were no sales of unregistered securities during fiscal 2022, 2021, or 2020. 26 Performance Comparison The following graph shows changes over the five fiscal years ending May 1, 2022, in the value of $100 invested in (1) the common stock of the company, (2) the Hemscott Textile Manufacturing Group Index reported by Standard and Poor’s, consisting of three companies in the textile industry, and (3) the Standard & Poor’s 500 Index.
Sales of Unregistered Securities There were no sales of unregistered securities during fiscal 2023, 2022, or 2021. 26 Performance Comparison The following graph shows changes over the five fiscal years ending April 30, 2023, in the value of $100 invested in (1) the common stock of the company, (2) the Hemscott Textile Manufacturing Group Index reported by Standard and Poor’s, consisting of three companies in the textile industry, and (3) the Standard & Poor’s 500 Index.
Shoucair Water Tower Research – Budd Bugatch, CFA 25 Dividends and Share Repurchases; Sales of Unregistered Securities Share Repurchases ISSUER PURCHASES OF EQUITY SECURITIES Period (a) Total Number of Shares Purchased (b) Average Price Paid per Share (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (d) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1) January 31, 2022 to March 6, 2022 — $ — — $ 3,248,094 March 7, 2022 to April 3, 2022 — $ — — $ 3,248,094 April 4, 2022 to May 1, 2022 — $ — — $ 3,248,094 Total — $ — — $ 3,248,094 (1) In March 2020, our board of directors approved an authorization for us to acquire up to $5.0 million of our common stock.
Analyst Coverage These analysts cover Culp, Inc.: Sidoti & Company, LLC – Anthony Lebiedzinski Water Tower Research – Budd Bugatch, CFA 25 Dividends and Share Repurchases; Sales of Unregistered Securities Share Repurchases ISSUER PURCHASES OF EQUITY SECURITIES Period (a) Total Number of Shares Purchased (b) Average Price Paid per Share (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (d) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1) January 30, 2023 to March 5, 2023 — $ — — $ 3,248,094 March 6, 2023 to April 2, 2023 — $ — — $ 3,248,094 April 3, 2023 to April 30, 2023 — $ — — $ 3,248,094 Total — $ — — $ 3,248,094 (1) In March 2020, our board of directors approved an authorization for us to acquire up to $5.0 million of our common stock.
The graph assumes an initial investment of $100 at the end of fiscal 2017 and the reinvestment of all dividends during the periods identified.
The graph assumes an initial investment of $100 at the end of fiscal 2018 and the reinvestment of all dividends during the periods identified. ITE M 6. [RESERVED] 27
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES Registrar and Transfer Agent Computershare Trust Company, N.A. Correspondence should be mailed to: Computershare P.O.
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED ST OCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES Registrar and Transfer Agent Computershare Trust Company, N.A. Correspondence should be mailed to: Computershare P.O. Box 43006 Providence, RI 02940-3078 Overnight correspondence should be sent to: Computershare 150 Royall St.
Dividends On June 29, 2022, our board of directors announced the decision to suspend the company’s quarterly cash dividend. Considering the current and expected macroeconomic conditions, we believe that preserving capital and managing our liquidity is in the company’s best interest to support future growth and the long-term interests of our shareholders.
Dividends On June 29, 2022, our board of directors announced the decision to suspend the company’s quarterly cash dividend. We believed that preserving capital and managing our liquidity during fiscal 2023 was in the company’s best interest to support future growth and the long-term interests of our shareholders. Accordingly, we did not make any dividend payments during fiscal 2023.
Removed
As of May 1, 2022, Culp, Inc. had approximately 3,545 shareholders based on the number of holders of record and an estimate of individual participants represented by security position listings. Analyst Coverage These analysts cover Culp, Inc.: Sidoti & Company, LLC – Anthony Lebiedzinski Value Line – Simon R.
Added
Our board of directors has sole authority to determine if and when we will declare future dividends, and on what terms. We will continue to reassess our dividend policy each quarter. Future dividend payments will depend on earnings, capital requirements, financial condition, excess availability under our lines of credit, market and economic conditions, and other factors, including alternative investment opportunities.
Removed
During fiscal 2020, dividend payments totaled $5.1 million, which represented quarterly cash dividend payments ranging from $0.10 per share to $0.105 per share.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

114 edited+83 added−74 removed23 unchanged
Biggest changeThis difference was due mostly to (i) a net increase in cash that was generated during fiscal 2021 due to a significant surge in customer demand as a result of the focus-on-the-home trend that occurred as businesses began to re-open coming out of pandemic-related closures, which such surge did not recur during fiscal 2022; (ii) a decrease in accounts payable due to the significant decrease in net sales during the fourth quarter of fiscal 2022 compared with the fourth quarter of fiscal 2021, as noted above, and due to our return to normal credit terms with our vendors, as opposed to the extended terms previously granted in response to the COVID-19 pandemic; (iii) an increase in inventory due to higher material costs, as well as an increase in inventory purchases to protect against supply chain disruption and support our customers; (iv) a decrease in accrued expenses primarily due to annual incentive bonus compensation paid during the first quarter of fiscal 2022; (v) $1.9 million in payments for the new building lease and start-up expenses associated with our upholstery fabrics cut and sew operation located in Haiti; partially offset by (vi) a decrease in accounts receivable related to the decrease in net sales during the fourth quarter of fiscal 2022 compared with the fourth quarter of fiscal 2021, as noted above, and due to our customers’ return to normal credit terms, rather than the extended terms previously granted in response to the COVIVD-19 pandemic.
Biggest changeThis trend mostly reflects (i) a reduction of inventory related to the significant decline in net sales, improved alignment of inventory purchases with current customer demand trends, and promotional programs to reduce aged raw materials and finished goods inventory; (ii) an abnormally high decrease in accounts payable due to the COVID-19 related shutdowns that affected our operations located in China during the fourth quarter of fiscal 2022, which decrease did not recur during fiscal 2023; (iii) annual incentive payments made during the first quarter of fiscal 2022 that did not recur during fiscal 2023, partially offset by (iv) an abnormally high decrease in accounts receivable due to COVID-19 related shutdowns that affected our operations located in China during the fourth quarter of fiscal 2022, which decrease did not recur during fiscal 2023, and (v) a decrease in net cash earnings during fiscal 2023 compared with fiscal 2022.
As a result, we are now the sole owner with full control of this cut and sewn mattress cover operation (see Note 2 of the consolidated financial statements for further details regarding this business combination). The upholstery fabrics segment develops, sources, manufactures, and sells fabrics primarily to residential and commercial furniture manufacturers.
As a result, we are now the sole owner with full control of this cut and sewn mattress cover operation (see Note 2 of the consolidated financial statements for further details regarding this business combination). Upholstery Fabrics The upholstery fabrics segment develops, sources, manufactures, and sells fabrics primarily to residential and commercial furniture manufacturers.
Uncertainty in Income Taxes An unrecognized income tax benefit for an uncertain income tax position can be recognized in the first interim period if the more-likely-than-not recognition threshold is met by the end of the reporting period, if the position is effectively settled through examination, negotiation, or litigation, or if the statute of limitations for the relevant taxing authority to examine and challenge the tax position has expired.
Uncertainty in Income Taxes An unrecognized income tax benefit for an uncertain income tax position can be recognized in the first interim period if the more-likely-than-not recognition threshold is met by the end of the reporting period, or if the position is effectively settled through examination, negotiation, or litigation, or if the statute of limitations for the relevant taxing authority to examine and challenge the tax position has expired.
The strength and flexibility of our global manufacturing and sourcing operations in the U.S., Canada, Haiti, Asia, and Turkey enabled us to support the evolving needs of our mattress fabrics and cover customers throughout the year.
The strength and flexibility of our global manufacturing and sourcing operations in the U.S., Canada, Haiti, Asia, and Turkey also enabled us to support the evolving needs of our mattress fabrics and cover customers throughout the year.
U.S. federal and state income tax returns filed by us remain subject to examination for income tax years 2019 and subsequent. Canadian federal income tax returns filed by us remain subject to examination for income tax years 2018 and subsequent. Canadian provincial (Quebec) income tax returns filed by us remain subject to examination for income tax years 2018 and subsequent.
U.S. federal and state income tax returns filed by us remain subject to examination for income tax years 2019 and subsequent. Canadian federal income tax returns filed by us remain subject to examination for income tax years 2019 and subsequent. Canadian provincial (Quebec) income tax returns filed by us remain subject to examination for income tax years 2019 and subsequent.
Although management closely monitors demand in each product to decide which patterns and styles to hold in inventory, the availability of low-cost imported products and shifts in consumer preferences and styles subject the company to markdowns of inventory. Management continually examines inventory to determine if there are indicators that the carrying value exceeds its net realizable value.
Although management closely monitors demand for each product category to decide which patterns and styles to hold in inventory, the availability of low-cost imported products and shifts in consumer preferences and styles subject the company to markdowns of inventory. Management continually examines inventory to determine if there are indicators that the carrying value exceeds its net realizable value.
We have upholstery fabric operations located in Shanghai, China, and Burlington, NC. During the third quarter of fiscal 2022, we also commenced operation of a new leased facility in Ouanaminthe, Haiti dedicated to the production of cut and sewn upholstery kits.
We have upholstery fabric operations located in Shanghai, China, and Burlington, North Carolina. During the third quarter of fiscal 2022, we also commenced operation of a new leased facility in Ouanaminthe, Haiti dedicated to the production of cut and sewn upholstery kits.
The determination of the inputs and complex assumptions used, and the application of the Monte Carlo valuation model, requires significant judgment by management and advice from an external advisor. We recorded $1.1 million, $1.3 million, and $614,000 of compensation expense within selling, general, and administrative expense for our equity-based awards in fiscal 2022, 2021, and 2020, respectively.
The determination of the inputs and complex assumptions used, and the application of the Monte Carlo valuation model, requires significant judgment by management and advice from an external advisor. We recorded $1.1 million, $1.1 million, and $1.3 million of compensation expense within selling, general, and administrative expense for our equity-based awards in fiscal 2023, 2022, and 2021, respectively.
For our operations in Haiti, taxable income or losses are not subject to income tax, as we are in an economic zone that permits a 0% income tax rate for the first fifteen years of operations, for which we have ten years remaining.
For our operations in Haiti, taxable income or losses are not subject to income tax, as we are located in an economic zone that permits a 0% income tax rate for the first fifteen years of operations, for which we have nine years remaining.
RISK FACTORS,” for a discussion of factors that may cause results to differ materially. General Our fiscal year is the 52 or 53-week period ending on the Sunday closest to April 30. Fiscal 2022, 2021, and 2020 included 52 weeks, 52 weeks, and 53 weeks, respectively. Our operations are classified into two business segments: mattress fabrics and upholstery fabrics.
RISK FACTORS,” for a discussion of factors that may cause results to differ materially. General Our fiscal year is the 52 or 53-week period ending on the Sunday closest to April 30. Fiscal 2023, 2022, and 2021 each included 52- weeks periods. Our operations are classified into two business segments: mattress fabrics and upholstery fabrics.
(2) “Other” for all periods presented represents miscellaneous adjustments that pertain to U.S permanent differences such as meals and entertainment and income tax provision to return adjustments. GILTI Fiscal 2021 36 Effective July 20, 2020, the U.S. Treasury Department finalized and enacted previously proposed regulations regarding the GILTI tax provisions of the Tax Cuts and Jobs Act of 2017 (“TCJA”).
(3) “Other” for all periods presented represents miscellaneous adjustments that pertain to U.S. permanent differences such as meals and entertainment and income tax provision to return adjustments. GILTI Fiscal 2022 Effective July 20, 2020, the U.S. Treasury Department finalized and enacted previously proposed regulations regarding the GILTI tax provisions of the Tax Cuts and Jobs Act of 2017 (“TCJA”).
Additionally, Read Window Products, LLC (“Read”), a wholly-owned subsidiary with operations located in Knoxville, TN, provides window treatments and sourcing of upholstery fabrics and other products, as well as measuring and installation services of Read’s products, to customers in the hospitality and commercial industries.
Additionally, Read Window Products, LLC, a wholly-owned subsidiary with operations located in Knoxville, Tennessee, 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.
In accordance with the TCJA, we will be required to pay annual U.S. federal transition tax payments as follows: FY 2023 - $264,000; FY 2024 - $499,000; FY 2025- $665,000; and FY 2026 - $831,000. 2021 compared with 2020 For a comparison of our results of operations for the fiscal years ended May 2, 2021, and May 3, 2020, see “Part II, Item 7.
In accordance with the TCJA, we will be required to pay annual U.S. federal transition tax payments as follows: FY 2024 - $499,000; FY 2025- $665,000; and FY 2026 - $831,000. 2022 compared with 2021 For a comparison of our results of operations for the fiscal years ended May 1, 2022, and May 2, 2021, see “Part II, Item 7.
Adoption of New Accounting Pronouncements Refer to Note 1 of the consolidated financial statements for recently adopted accounting pronouncements for fiscal 2022. Recently Issued Accounting Standards Refer to Note 1 of the consolidated financial statements for recently issued accounting pronouncements for fiscal 2023 and beyond.
Adoption of New Accounting Pronouncements Refer to Note 1 of the consolidated financial statements for recently adopted accounting pronouncements for fiscal 2023. Recently Issued Accounting Standards Refer to Note 1 of the consolidated financial statements for recently issued accounting pronouncements for fiscal 2024 and beyond. 44
Due to the uncertain and unpredictable nature of our estimates, actual results could differ from the estimates that were previously reported in our consolidated financial statements. As of May 1, 2022, we believe the following list represents our critical accounting estimates that have or are reasonably likely to have a material effect on our financial condition or results of operations.
Due to the uncertain and unpredictable nature of our estimates, actual results could differ from the estimates that were previously reported in our consolidated financial statements. As of April 30, 2023, we believe the following list represents our critical accounting estimates that have or are reasonably likely to have a material effect on our financial condition or results of operations.
Based on our assessment, we determined we still have a recent history of significant cumulative U.S. taxable losses, in that we experienced U.S. taxable losses during each of the last three fiscal years. In addition, we are currently expecting U.S. taxable losses to continue into fiscal 2023.
Based on our assessment, we determined we still have a recent history of significant cumulative U.S. pre-tax losses, in that we experienced U.S. pre-tax losses during each of the last three fiscal years. In addition, we are currently expecting U.S. pre-tax losses to continue into fiscal 2024.
We do not expect to meet the GILTI High-Tax exception for the 2022 tax year regarding our foreign operations located in Canada and Haiti. With regard to Canada, we placed several significant capital projects into service during fiscal 2022, and therefore, are eligible for a significant amount of deductible accelerated depreciation.
We did not meet the GILTI High-Tax exception for the 2022 tax year regarding our foreign operations located in Canada and Haiti. With regard to Canada, we placed several significant capital projects into service during fiscal 2022, and therefore, were eligible for a significant amount of income tax deductible accelerated depreciation.
The foreign exchange rate losses incurred on our U.S. dollar denominated balance sheet accounts associated with our operations located in China are income tax deductible, as we incur income tax expense and pay income taxes in China’s local currency.
The foreign exchange rate gains incurred on our U.S. dollar denominated balance sheet accounts associated with our operations located in China are considered taxable income, as we incur income tax expense and pay income taxes in China’s local currency.
As of May 1, 2022, we assessed the liquidity requirements of our U.S. parent company and determined that our undistributed earnings from our foreign subsidiaries would not be reinvested indefinitely and therefore, would be eventually distributed to our U.S. parent company. The conclusion reached from our assessment is consistent with prior years.
As of April 30, 2023, we assessed the liquidity requirements of our U.S. parent company and determined that our undistributed earnings from our foreign subsidiaries would not be reinvested indefinitely and therefore, would be eventually distributed to our U.S. parent company. The conclusion reached from our assessment is consistent with prior years.
Executive Summary 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.
Executive Summary 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, such as restructuring expense and restructuring related charges.
As of May 1, 2022, we had a $1.1 million total gross unrecognized income tax benefit that relates to double taxation under applicable income tax treaties with foreign tax jurisdictions. At this time, significant change associated with this income tax benefit is not expected within the next fiscal year.
As of April 30, 2023, we had a $1.2 million total gross unrecognized income tax benefit that primarily relates to double taxation under applicable income tax treaties with foreign tax jurisdictions. At this time, significant change associated with this income tax benefit is not expected within the next fiscal year.
As of May 1, 2022, there were no outstanding borrowings under our lines of credit. Dividend Program On June 29, 2022, our board of directors announced the decision to suspend the company’s quarterly cash dividend.
As of April 30, 2023, there were no outstanding borrowings under our lines of credit. 30 Dividend Program On June 29, 2022, our board of directors announced the decision to suspend the company's quarterly cash dividend.
As a result, our current year’s income tax expense is much lower than prior fiscal years, and therefore, our current effective income tax rate is expected to be lower than the required 18.9% current effective income tax rate to meet the GILTI High-Tax exception.
As a result, our current year’s income tax expense was much lower than prior years, and therefore, our current effective income tax rate was lower than the required 18.9% current effective income tax rate to meet the GILTI High-Tax exception.
We also expect the slowdown in new retail business for the residential home furnishings industry may affect demand for our residential business for some 33 period of time .
Looking ahead, we expect the slowdown in new retail business for the residential home furnishings industry may affect demand for our residential business for some period of time.
Our judgments are often based on estimates that are derived from (i) forecasted financial information, (ii) assumptions on when certain taxable or deductible events will occur, and (iii) interpretation of complex income tax laws and regulations. As of May 1, 2022, we recorded a full valuation allowance against all our U.S. net deferred income tax assets totaling $11.9 million.
Our judgments are often based on estimates that are derived from (i) forecasted financial information, (ii) assumptions on when certain taxable or deductible events will occur, and (iii) interpretation of complex income tax laws and regulations. As of April 30, 2023, we recorded a full valuation allowance against all our U.S. net deferred income tax assets totaling $18.7 million.
While management believes that adequate markdowns for inventory have been made in the consolidated financial statements, significant unanticipated changes in demand or changes in consumer tastes and preferences could result in additional inventory markdowns in the future. As of May 1, 2022, and May 2, 2021, the reserve for inventory markdowns was $7.3 million and $6.1 million, respectively.
While management believes that adequate markdowns for inventory have been made in the consolidated financial statements, significant unanticipated changes in demand or changes in consumer tastes and preferences could result in additional inventory markdowns in the future. 43 As of April 30, 2023, and May 1, 2022, the reserve for inventory markdowns was $11.8 million and $7.3 million, respectively.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our annual report on Form 10-K for the fiscal year ended May 2, 2021, filed with the SEC on July 16, 2021.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our annual report on Form 10-K for the fiscal year ended May 1, 2022, filed with the SEC on July 15, 2022.
Uncertain Income Tax Positions As of May 1, 2022, we had $1.1 million of total gross unrecognized tax benefits, which primarily relate to double taxation under applicable income tax treaties with foreign tax jurisdictions.
Uncertain Income Tax Positions As of April 30, 2023, we had $1.2 million of total gross unrecognized tax benefits, which primarily relate to double taxation under applicable income tax treaties with foreign tax jurisdictions.
Refer to Note 12 of the consolidated financial statements for additional disclosures regarding our assessments and conclusions reached regarding our valuation allowance as of May 1, 2022. 42 Stock-Based Compensation We are required to recognize compensation expense for all stock-based compensation awards in the financial statements, with the cost measured at the grant date fair value.
Refer to Note 11 of the consolidated financial statements for additional disclosures regarding our assessments and conclusions reached regarding our valuation allowance as of April 30, 2023. Stock-Based Compensation We are required to recognize compensation expense for all stock-based compensation awards in the financial statements, with the cost measured at the grant date fair value.
As a result of the significant weight of this negative evidence, we believe it is more-likely-than-not that our U.S. net deferred income tax assets will not be fully realizable, and therefore we provided for a full valuation allowance against our U.S. net deferred income tax assets totaling $11.9 million as of May 1, 2022.
As a result of the significant weight of this negative evidence, we believe it is more-likely-than-not that our U.S. net deferred income tax assets will not be fully realizable, and therefore we provided for a full valuation allowance against our U.S. net deferred income tax assets totaling $18.7 million as of April 30, 2023.
Income Taxes – Valuation Allowance We evaluate the realizability of our deferred income taxes to determine if a valuation allowance is required. We are required to assess whether a valuation allowance should be established based on the consideration of all available evidence using a “more-likely-than-not” standard, with significant weight being given to evidence that can be objectively verified.
We are required to assess whether a valuation allowance should be established based on the consideration of all available evidence using a “more-likely-than-not” standard, with significant weight being given to evidence that can be objectively verified.
Since our operations located in Haiti are not subject to income tax, our projected current effective income tax rate of 0% will be lower than the required 18.9% current effective income tax rate to meet the GILTI High-Tax exception.
Since our operations located in Haiti are not subject to income tax, our current effective income tax rate was 0%, which is lower than the required 18.9% current effective income tax rate to meet the GILTI High-Tax exception.
The $3.5 million as of May 1, 2022, represents right of use assets of $2.0 million, $1.2 million, and $291,000 located in Haiti, the U.S., and Canada, respectively. 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.
The $2.3 million as of April 30, 2023, represents right of use assets of $1.5 million and $766,000 located in Haiti and Canada, respectively. The $3.5 million as of May 1, 2022, represents right of use assets of $2.0 million, $1.2 million, and $291,000 located in Haiti, the U.S., and Canada, respectively.
At this time, we cannot reasonably estimate the impact, but we note that if conditions worsen in either of these situations, the impact on our suppliers, consumers, and/or the global economy could adversely affect our operations and financial performance.
At this time, we cannot reasonably estimate the impact on our upholstery fabrics segment, but we note that if conditions worsen in either of these situations, including additional COVID-related shutdowns of our China operations, the impact on our operations, and/or on our suppliers, customers, consumers, and the global economy, could adversely affect our financial performance.
The $8.1 million as of May 1, 2022, represents right of use assets of $3.7 million, $2.6 million, and $1.8 million located in China, Haiti, and the U.S., respectively. 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.
The $2.6 million as of April 30, 2023, represents right of use assets of $1.5 million and $1.1 million located in China and the U.S., respectively. The $8.1 million as of May 1, 2022, represents right of use assets of $3.7 million, $2.6 million, and $1.8 million located in China, Haiti, and the U.S., respectively.
Other Expense Management is required to assess certain economic factors to determine the currency of the primary economic environment in which our foreign subsidiaries operate. Based on our assessments, the U.S. dollar was determined to be the functional currency of our operations located in China and Canada.
Other Expense Management is required to assess certain economic factors to determine the currency of the primary economic environment in which our foreign subsidiaries operate. Based on our assessments, the U.S. dollar was determined to be the functional currency of our operations located in China and Canada. Other expense during fiscal 2023 decreased $916,000, or 67.4%, compared with fiscal 2022.
To meet the provisions of the GILTI High-Tax exception, the tested foreign entity’s effective income tax rate related to current year’s earnings must be higher than 90% of the U.S. Federal income tax rate of 21% (i.e.,18.9%).
To meet the provisions of the GILTI High-Tax exception, the tested foreign entity’s effective income tax rate related to current year’s earnings must be higher than 90% of the U.S. Federal income tax rate of 21% (i.e.,18.9%). We did not meet the GILTI High-Tax exception for the 2021 tax year regarding our operations located in China.
Although our operations located in Canada and Haiti did not meet the GILTI High-Tax exception, we did not incur any GILTI tax for the 2022 tax year, as the losses subject to GILTI tax from our Haitian operations exceeded the income subject to GILTI tax from our Canadian operation.
Although our operations located in Canada and Haiti did not meet the GILTI High-Tax exception, we incurred a nominal amount of GILTI tax for the 2022 tax 38 year, as the losses subject to GILTI tax from our Haitian operations mostly offset the income subject to GILTI tax from our Canadian operation.
Income Before Income Taxes Overall, our loss before income taxes was $(325,000) for fiscal 2022, compared with income before income taxes of 10.9 million for the prior year.
(Loss) Income Before Income Taxes Overall, our consolidated loss before income taxes was $(28.4) million for fiscal 2023, compared with loss before income taxes of $(325,000) for the prior year.
Had these costs been included in cost of sales, gross profit would have been $31.8 million, or 10.8% of net sales, during fiscal 2022, and $45.9 million, or 15.3% of net sales, during fiscal 2021.
Had these costs been included in cost of sales, gross profit would have been $6.7 million, or 2.8% of net sales, during fiscal 2023, and $31.8 million, or 10.8% of net sales, during fiscal 2022.
Accordingly, as of May 1, 2022, we recorded a deferred income tax liability associated with our undistributed earnings from foreign subsidiaries of $3.6 million. Refer to Note 12 of the consolidated financial statements for additional disclosures regarding our deferred income tax liability associated with the undistributed earnings from our foreign subsidiaries.
Accordingly, as of April 30, 2023, we recorded a deferred income tax liability associated with our undistributed earnings from foreign subsidiaries of $4.2 million. Refer to Note 11 of the consolidated financial statements for additional disclosures regarding our deferred income tax liability associated with the undistributed earnings from our foreign subsidiaries.
These costs were $4.3 million during fiscal 2022 and $3.9 million during fiscal 2021. Warehousing costs include the operating expenses of our various finished goods distribution centers, such as personnel costs, utilities, building rent and material handling equipment, and lease expense.
Warehousing costs include the operating expenses of our various finished goods distribution centers, such as personnel costs, utilities, building rent and material handling equipment, and lease expense.
Considering the current and expected macroeconomic conditions, we believe that preserving capital and managing liquidity is in the company’s best interest to support future growth and the long-term interests of our shareholders. During fiscal 2022, dividend payments totaled $5.5 million, which represented quarterly dividend payments ranging from $0.11 per share to $0.115 per share.
We believed that preserving capital and managing our liquidity during fiscal 2023 was in the company’s best interest to support future growth and the long-term interests of our shareholders. Accordingly, we did not make any dividend payments during fiscal 2023. During fiscal 2022, dividend payments totaled $5.5 million, which represented quarterly dividend payments ranging from $0.11 share to $0.115.
Considering the current and expected macroeconomic conditions, we believe that preserving capital and managing liquidity is in the company’s best interest to support future growth and the long-term interests of our shareholders. During fiscal 2022, dividend payments totaled $5.5 million, which represented quarterly dividend payments ranging from $0.11 per share to $0.115 per share.
We believed that preserving capital and managing our liquidity during fiscal 2023 was in the company’s best interest to support future growth and the long-term interests of our shareholders. Accordingly, we did not make any dividend payments during fiscal 2023. During fiscal 2022, dividend payments totaled $5.5 million, which represented quarterly dividend payments ranging from $0.11 share to $0.115.
During fiscal 2022, we repurchased 121,688 shares of our common stock at a cost of $1.8 million. As a result, as of May 1, 2022, $3.2 million is available for additional repurchases of our common stock. Despite the current share repurchase authorization, the company does not expect to repurchase any shares through at least the first quarter of fiscal 2023.
Despite the current share repurchase authorizations, the company does not expect to repurchase any shares through at least the first quarter of fiscal 2024. During fiscal 2022, we repurchased 121,688 shares of our common stock at a cost of $1.8 million.
During fiscal 2022, we repurchased 121,688 shares of our common stock at a cost of $1.8 million. As a result, as of May 1, 2022, $3.2 million is available for additional repurchases of our common stock. Despite the current share repurchase authorization, the company does not expect to repurchase any shares through at least the first quarter of fiscal 2023.
Despite the current share repurchase authorizations, the company does not expect to repurchase any shares through at least the first quarter of fiscal 2024. During fiscal 2022, we repurchased 121,688 shares of our common stock at a cost of $1.8 million.
Impact of COVID-19 For a discussion of how COVID-19 has affected and may continue to affect our business and financial condition, see the discussion under the heading “COVID-19 Impact and Business Response” in Part I, Item 1 of this report, as well as the Risk Factors set forth in Part I, Item 1A of this report.
For further information on how COVID-19 has affected and may continue to affect our business and financial condition, see the Risk Factors set forth in Part I, Item 1A of this report.
By Geographic Area A summary of our cash and investments by geographic area follows: May 1, May 2, (dollars in thousands) 2022 2021 United States $ 4,430 $ 34,465 China 9,502 10,635 Canada 267 1,525 Haiti 341 220 Cayman Islands 10 8 $ 14,550 $ 46,853 Dividend Program On June 29, 2022, our board of directors announced the decision to suspend the company’s quarterly cash dividend.
By Geographic Area A summary of our cash by geographic area follows: April 30, May 1, (dollars in thousands) 2023 2022 United States $ 9,769 $ 4,430 China 10,669 9,502 Canada 281 267 Haiti 236 341 Cayman Islands 9 10 $ 20,964 $ 14,550 Dividend Program On June 29, 2022, our board of directors announced the decision to suspend the company's quarterly cash dividend.
Upholstery Fabrics Segment Net Sales Twelve Months Ended (dollars in thousands) May 1, 2022 May 2, 2021 % Change Non-U.S. Produced $ 133,271 93 % $ 133,029 94 % 0.2 % U.S.
Upholstery Fabrics Segment Net Sales Twelve Months Ended (dollars in thousands) April 30, 2023 May 1, 2022 % Change Non-U.S. Produced $ 114,589 92 % $ 133,271 93 % (14.0 )% U.S.
Our estimated cash income tax payments for fiscal 2023 are management’s current projections only and can be affected by actual earnings from our foreign subsidiaries located in China and Canada versus annual projections, changes in the foreign exchange rates associated with our operations located in China in relation to the U.S. dollar, and the timing of when significant capital projects will be placed into service, which determines the deductibility of accelerated depreciation. 38 Additionally, we currently do not expect to incur any income taxes in the U.S. on a cash basis during fiscal 2023 due to (i) the immediate expensing of U.S. capital expenditures, and (ii) our existing U.S. federal net operating loss carryforwards.
Our estimated cash income tax payments for fiscal 2024 are management’s current projections only and can be affected by actual earnings from our foreign subsidiaries located in China and Canada versus annual projections; changes in the foreign exchange rates associated with our operations located in China in relation to the U.S. dollar; the timing of when we will repatriate earnings and profits from China; and the timing of when significant capital projects will be placed into service, which determines the deductibility of accelerated depreciation.
(dollars in thousands) May 1, 2022 May 2, 2021 % Change Accounts receivable $ 9,865 $ 20,427 (51.7 )% Inventory 39,028 30,047 29.9 % Property, plant & equipment 38,731 41,694 (7.1 )% Right of use assets 3,469 4,278 (18.9 )% Total mattress fabrics segment assets $ 91,093 $ 96,446 (5.6 )% Refer to Note 18 of the consolidated financial statements for disclosures regarding determination of our segment assets.
(dollars in thousands) April 30, 2023 May 1, 2022 % Change Accounts receivable $ 12,396 $ 9,865 25.7 % Inventory 25,674 39,028 (34.2 )% Property, plant & equipment 33,749 38,731 (12.9 )% Right of use assets 2,308 3,469 (33.5 )% Total mattress fabrics segment assets $ 74,127 $ 91,093 (18.6 )% Refer to Note 17 of the consolidated financial statements for disclosures regarding determination of our segment assets.
Inventory turns were 3.0 during the fourth quarter of fiscal 2022, compared with 4.6 for the fourth quarter of fiscal 2021. 34 Property, Plant , & Equipment As of May 1, 2022, property, plant, and equipment increased by $535,000, or 35.8%, compared with May 2, 2021.
Inventory turns were 4.8 during the fourth quarter of fiscal 2023, compared with 3.0 for the fourth quarter of fiscal 2022. Property, Plant, & Equipment As of April 30, 2023, property, plant, and equipment decreased by $359,000, or 17.7%, compared with May 1, 2022.
Our net cash used in operating activities was $17.4 million during fiscal 2022, compared with net cash provided by operating activities of $21.5 million during fiscal 2021.
Our net cash provided by operating activities was $7.8 million during fiscal 2023, an increase of $25.2 million compared with net cash used in operating activities of $(17.4) million during fiscal 2022.
Our net cash used in operating activities was $17.4 million during fiscal 2022, compared with net cash provided by operating activities of $21.5 million during fiscal 2021.
Our net cash provided by operating activities was $7.8 million during fiscal 2023, an increase of $25.2 million compared with net cash used in operating activities of $(17.4) million during fiscal 2022.
Refer to Note 12 of the consolidated financial statements for additional disclosures regarding the valuation allowance against our U.S. net deferred income taxes. 37 Deferred Income Taxes – Undistributed Earnings from Foreign Subsidiaries We assess (i) whether the undistributed earnings from our foreign subsidiaries will be reinvested indefinitely or eventually distributed to our U.S. parent company, and (ii) if we are required to a record a deferred income tax liability for undistributed earnings from foreign subsidiaries that will not be reinvested indefinitely.
Deferred Income Taxes – Undistributed Earnings from Foreign Subsidiaries We assess whether the undistributed earnings from our foreign subsidiaries will be reinvested indefinitely or eventually distributed to our U.S. parent company, and whether we are required to a record a deferred income tax liability for those undistributed earnings from foreign subsidiaries that will not be reinvested indefinitely.
The decrease in other expense during fiscal 2022, as compared with fiscal 2021, is due mostly to more favorable foreign currency exchange rates applied against our balance sheet accounts denominated in Chinese Renminbi to determine the corresponding U.S. dollar financial reporting amounts.
This decrease primarily relates to more favorable foreign currency exchange rates applied against our balance sheet accounts denominated in Chinese Renminbi to determine the corresponding U.S. dollar financial reporting amounts.
See the above section titled “ Income Taxes Paid ” of this Item 7 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION for further details. 39 Our cash and cash equivalents may be adversely affected by factors beyond our control, such as ( i ) recent customer demand trends, (ii) supply chain disruptions, (iii) rising interest rates and inflation, (iv) world events (including the Russian-Ukraine war), and (v) the continuing uncertainty associated with COVID-19.
Our cash may be adversely affected by factors beyond our control, such as (i) customer demand trends, (ii) supply chain disruptions, (iii) rising interest rates and inflation, (iv) world events (including the Russian-Ukraine war), and (v) the continuing uncertainty associated with COVID-19.
These income tax benefits were associated with income tax deductible foreign exchange rate losses based on more unfavorable foreign currency exchange rates applied against balance sheet accounts denominated in U.S. dollars to determine the corresponding Chinese Renminbi local currency amounts.
This income tax expense of $355,000 was associated with taxable foreign exchange rate gains based on less favorable foreign currency exchange rates applied against balance sheet accounts denominated in U.S. dollars to determine the corresponding Chinese Renminbi local currency amounts.
The following schedule summarizes the principal differences between income tax expense at the federal income tax rate and the effective income tax rate reflected in the consolidated financial statements: 2022 2021 U.S. federal income tax rate 21.0 % 21.0 % valuation allowance (56.3 ) 78.4 income tax effects of the 2017 Tax Cuts and Jobs Act — (33.8 ) global intangible low taxed income tax (GILTI) (540.9 ) — foreign tax rate differential (206.2 ) 10.9 income tax effects of Chinese foreign exchange gains and losses (20.6 ) (8.4 ) withholding taxes associated with foreign tax jurisdictions (172.8 ) 7.7 uncertain income tax positions 105.4 1.6 U.S. state income taxes 21.5 0.3 stock-based compensation (3.3 ) 0.3 gain on bargain purchase — (1.6 ) other (2) (35.8 ) (5.7 ) Consolidated effective income tax rate (1) (888.0 )% 70.7 % (1) Our consolidated effective income tax rates for all fiscal years presented were negatively affected by the mix of consolidated (loss) income before income taxes, as significant pre-tax losses have been incurred by our U.S. operations and almost all of our taxable income was earned by our foreign operations located in China and Canada, which have higher income tax rates than the U.S.
Income Taxes Effective Income Tax Rate & Income Tax Expense We recorded income tax expense of $3.1 million, or (11.0)% of loss before income taxes, during fiscal 2023, compared with income tax expense of $2.9 million, or (888.0)% of loss before income taxes, during fiscal 2022. 37 The following schedule summarizes the principal differences between income tax expense at the federal income tax rate and the effective income tax rate reflected in the consolidated financial statements: 2023 2022 U.S. federal income tax rate 21.0 % 21.0 % valuation allowance (24.0 ) (56.3 ) global intangible low taxed income tax (GILTI) — (540.9 ) foreign tax rate differential (4.0 ) (206.2 ) income tax effects of Chinese foreign exchange gains and losses (0.9 ) (20.6 ) withholding taxes associated with foreign tax jurisdictions (2.4 ) (172.8 ) uncertain income tax positions (0.3 ) 105.4 U.S. state income taxes 0.6 21.5 stock-based compensation (0.3 ) (3.3 ) other (3) (0.7 ) (35.8 ) consolidated effective income tax rate (1) (2) (11.0 )% (888.0 )% (1) Our consolidated effective income tax rate during fiscal 2023 was much more negatively affected by the mix of earnings and losses between our U.S. operations and foreign subsidiaries, as compared with fiscal 2022.
Despite these challenges, we believe our business is well positioned for the long-term with our product-driven strategy and innovative product offerings, as well as our flexible Asian platform, our long-term supplier relationships, and our expanded capacity in Haiti.
Despite this challenge, we believe our business is well positioned for the long term with our product-driven strategy and innovative product offerings, including our popular portfolio of LiveSmart® performance products, as well as our flexible Asian platform and our long-term supplier relationships.
Our effective income tax rates for fiscal 2022 and 2021 were negatively affected by the mix of (loss) income before income taxes, as significant pre-tax losses were incurred by our U.S. operations and almost all our taxable income was earned by our foreign operations located in China and Canada, which have higher income tax rates than the U.S.
In addition, almost all of our taxable income for each of fiscal 2023 and 2022 was earned by our foreign operations located in China and Canada, which have higher income tax rates than the U.S.
T he outcome of these income tax uncertainties is dependent upon various matters including tax examinations, legal proceedings, competent authority proceedings, changes in regulatory tax laws, or interpretations of those tax laws, or expiration of statutes of limitation. As a result of these inherent uncertainties, we cannot reasonably estimate the timing of payment on this amount, if any.
The outcome of these income tax uncertainties is dependent upon various matters including tax examinations, legal proceedings, competent authority proceedings, changes in regulatory tax laws, or interpretations of those tax laws, or expiration of statutes of limitation.
Results of Operations Twelve Months Ended (dollars in thousands) May 1, 2022 May 2, 2021 Change Net sales $ 294,839 $ 299,720 (1.6 )% Gross profit 36,093 49,832 (27.6 )% Gross profit margin 12.2 % 16.6 % (440 ) bp Selling, general, and administrative expenses 35,415 37,756 (6.2 )% Income from operations 678 12,076 (94.4 )% Operating margin 0.2 % 4.0 % (380 ) bp (Loss) income before income taxes (325 ) 10,880 (103.0 )% Income tax expense 2,886 7,693 (62.5 )% Net (loss) income (3,211 ) 3,218 (199.8 )% 28 Net Sales Overall, our net sales decreased 1.6% in fiscal 2022 compared with a year ago, with mattress fabric net sales decreasing 3.5% and upholstery fabric net sales increasing 0.4%.
Results of Operations Twelve Months Ended (dollars in thousands) April 30, 2023 May 1, 2022 Change Net sales $ 234,934 $ 294,839 (20.3 )% Gross profit 10,896 36,093 (69.8 )% Gross profit margin 4.6 % 12.2 % (760) bp Selling, general, and administrative expenses 37,978 35,415 7.2 % Restructuring expense 1,396 — 100.0 % (Loss) income from operations (28,478 ) 678 N.M Operating margin (12.1 )% 0.2 % (1230) bp Loss before income taxes (28,390 ) (325 ) N.M Income tax expense 3,130 2,886 8.5 % Net loss (31,520 ) (3,211 ) N.M Net Sales Our consolidated net sales decreased 20.3% in fiscal 2023 compared with a year ago, with mattress fabric net sales decreasing 27.1% and upholstery fabric net sales decreasing 13.1%.
During fiscal 2021, we did not repurchase any shares of common stock. 30 Results of Operations The following table sets forth certain items in our consolidated statements of net (loss) income as a percentage of net sales.
Results of Operations The following table sets forth certain items in our consolidated statements of net loss as a percentage of net sales.
Liquidity and Capital Resources Overall Currently, our sources of liquidity include cash and cash equivalents, cash flow from operations, and amounts available under our revolving credit lines. These sources have been adequate for day-to-day operations, capital expenditures, debt payments, common stock repurchases, and dividend payments.
Liquidity and Capital Resources Overall Currently, our sources of liquidity include cash and cash equivalents ("cash"), cash flow from operations, and amounts available under our revolving credit lines.
The $38.7 million as of May 1, 2022, represents property, plant, and equipment of $25.6 million, $12.4 million, and $757,000 located in the U.S., Canada, and Haiti, respectively. The $41.7 million as of May 2, 2021, represents property, plant, and equipment of $28.8 million, $12.0 million, and $855,000 located in the U.S., Canada, and Haiti, respectively.
The $38.7 million as of May 1, 2022, represents property, plant, and equipment of $25.6 million, $12.4 million, and $757,000 located in the U.S., Canada, and Haiti, respectively. 33 Right of Use Assets As of April 30, 2023, right of use assets decreased by $1.2 million, or 33.5%, compared with May 1, 2022.
The $2.0 million as of May 1, 2022, represents property, plant, and equipment of $1.0 million, $756,000, and $255,00 located in the U.S., Haiti, and China, respectively. The $1.5 million as of May 2, 2021, represents property, plant, and equipment of $1.1 million and $420,000 located in the U.S. and China, respectively.
The $2.0 million as of May 1, 2022, represents property, plant, and equipment of $1.0 million, $756,000, and $255,000 located in the U.S., Haiti, and China, respectively. Right of Use Assets As of April 30, 2023, our right of use assets decreased by $5.5 million, or 67.8%, compared with May 1, 2022.
Produced 9,409 7 % 9,020 6 % 4.3 % Total $ 142,680 100 % $ 142,049 100 % 0.4 % Upholstery fabrics sales increased 0.4% in fiscal 2022 compared to the prior year.
Produced 9,350 8 % 9,409 7 % (0.6 )% Total $ 123,939 100 % $ 142,680 100 % (13.1 )% Upholstery fabrics sales decreased 13.1% in fiscal 2023 compared to the prior year.
Fiscal Fiscal 2022 2021 Net sales 100.0 % 100.0 % Cost of sales (87.8 ) (83.4 ) Gross profit 12.2 16.6 Selling, general and administrative expenses (12.0 ) (12.6 ) Income from operations 0.2 4.0 Interest expense — — Interest income 0.1 0.1 Gain on bargain purchase — 0.3 Other expense (0.5 ) (0.7 ) (Loss) income before income taxes (0.1 ) 3.6 Income tax expense * (888.0 ) 70.7 Income from investment in unconsolidated joint venture — — Net (loss) income (1.1 ) 1.1 * Calculated as a percentage of (loss) income before income taxes. 2022 compared with 2021 Segment Analysis Mattress Fabrics Segment Twelve Months Ended (dollars in thousands) May 1, 2022 May 2, 2021 Change Net sales $ 152,159 $ 157,671 (3.5 )% Gross profit 16,458 23,864 (31.0 )% Gross profit margin 10.8 % 15.1 % (430 ) bp Selling, general and administrative expenses 12,246 12,066 1.5 % Income from operations 4,212 11,798 (64.3 )% Operating margin 2.8 % 7.5 % (470 ) bp Net Sales Mattress fabrics sales decreased 3.5% in fiscal 2022 compared to the prior year.
Fiscal Fiscal 2023 2022 Net sales 100.0 % 100.0 % Cost of sales (95.4 ) (87.8 ) Gross profit 4.6 12.2 Selling, general and administrative expenses (16.2 ) (12.0 ) Restructuring expense (0.6 ) — (Loss) income from operations (12.1 ) 0.2 Interest income 0.2 0.1 Other expense (0.2 ) (0.5 ) Loss before income taxes (12.1 ) (0.1 ) Income tax expense * (11.0 ) (888.0 ) Net loss (13.4 ) (1.1 ) * Calculated as a percentage of loss before income taxes. 31 2023 compared with 2022 Segment Analysis Mattress Fabrics Segment Twelve Months Ended (dollars in thousands) April 30, 2023 May 1, 2022 Change Net sales $ 110,995 $ 152,159 (27.1)% Gross (loss) profit (6,739 ) 16,458 (140.9)% Gross margin (6.1 )% 10.8 % (1690) bp Selling, general and administrative expenses 11,942 12,246 (2.5)% (Loss) income from operations (18,681 ) 4,212 N.M.
We believe our cash and cash equivalents of $14.6 million as of May 1, 2022, cash flow from operations, and the current availability under our revolving credit lines will be sufficient to fund our foreseeable business needs, commitments, and contractual obligations.
As of April 30, 2023, we believe our cash of $21.0 million, cash flow from operations, and the current availability under our revolving credit lines totaling $32.6 million (Refer to Note 10 of the consolidated financial statements for further details) will be sufficient to fund our foreseeable business needs, capital expenditures, commitments, and contractual obligations.
Notably, the ongoing economic and health effects of the COVID-19 pandemic, as well as the impact of Russia’s invasion of Ukraine, including its effect on petrochemical pricing and consumer spending, remain unknown and depend on factors beyond our control.
Notably, the potential ongoing impact of Russia’s invasion of Ukraine, as well as the economic and health effects from possible additional surges in the coronavirus, remain unknown and depend on factors beyond our control.
This decrease of $1.3 million was partially offset by a $450,000 realized loss on the sale of our remaining short-term available for sale and held-to-maturity investments that mostly occurred during the fourth quarter of fiscal 2021.
In addition, we incurred a realized loss totaling $450,000 on the sale of our remaining short-term available-for-sale and held-to-maturity investments that mostly occurred during the fourth quarter of fiscal 2022, which realized loss did not recur during fiscal 2023.
During fiscal 2021, we did not repurchase any shares of common stock. Working Capital Operating Working Capital Operating working capital (accounts receivable and inventories, less deferred revenue, accounts payable-trade, and capital expenditures) was $67.7 million as of May 1, 2022, compared with $50.2 million as of May 2, 2021.
Working Capital Operating Working Capital Operating working capital (accounts receivable and inventories, less deferred revenue, accounts payable-trade, and accounts payable-capital expenditures) was $39.2 million as of April 30, 2023, compared with $67.7 million as of May 1, 2022. Operating working capital turnover was 4.6 during the fourth quarter of fiscal 2023 compared with 5.2 during the fourth quarter fiscal 2022.
During fiscal 2022, we reported foreign exchange rate losses associated with our China operations of $104,000, a decrease of $1.3 million as compared to $1.4 million in foreign exchange rate losses reported during fiscal 2021.
During fiscal 2023, we reported a foreign exchange rate gain of $588,000 associated with our operations located in China, compared with a foreign exchange rate loss of $(104,000) incurred during fiscal 2022.
Since the company operates in multiple jurisdictions, we assess the need for a valuation allowance on a jurisdiction-by-jurisdiction basis, considering the effects of local tax law.
Since the company operates in multiple jurisdictions, we assess the need for a valuation allowance on a jurisdiction-by-jurisdiction basis, considering the effects of local tax law. As of April 30, 2023, we evaluated the realizability of our U.S. net deferred income tax assets to determine if a full valuation allowance was still required.
For fiscal 2023, cash capital expenditures are expected to focus primarily on critical maintenance level capital spending centered on our mattress fabrics segment. Funding for capital expenditures is expected to be primarily from cash provided by operating activities. 41 Handling Costs We record warehousing costs in SG&A expenses.
Funding for capital expenditures is expected to be primarily from cash provided by operating activities. Handling Costs We record warehousing costs in SG&A expenses. These costs were $4.2 million during fiscal 2023 and $4.3 million during fiscal 2022.
Revolving Credit Agreements Currently, we have revolving credit agreements with banks for our U.S. parent company and our operations located in China. As of May 1, 2022, we did not have any outstanding borrowings associated with our revolving credit agreements. Our loan agreements require, among other things, that we maintain compliance with certain financial covenants.
Financing Arrangements, Commitments and Contingencies, and Contractual Obligations Revolving Credit Agreements Currently, we have revolving credit agreements with banks for our U.S. parent company and our operations located in China. As of April 30, 2023, we did not have any outstanding borrowings associated with our revolving credit agreements.
Income Taxes Paid The following table sets forth income taxes paid (refunded) by jurisdiction: (dollars in thousands) 2022 2021 United States Federal - Alternative Minimum Tax (AMT) credit refunds (1) $ — $ (1,510 ) United States Federal - transition tax 266 226 China - Income Taxes 2,036 2,076 China - Withholding Taxes Associated with Earnings and Profits Distribution to U.S.
Refer to Note 11 of the consolidated financial statements for disclosures and additional information regarding our uncertain income tax positions. 39 Income Taxes Paid The following table sets forth income taxes paid by jurisdiction: (dollars in thousands) 2023 2022 United States Federal - Transition Tax 265 266 China - Income Taxes 1,831 2,036 China - Withholding Taxes Associated with Earnings and Profits Distribution to U.S.
These factors could cause delays in receipt of payment on accounts receivable and could increase inventory purchases to protect against supply chain disruptions and inflation.
These factors could cause delays in receipt of payment on accounts receivable and could increase cash disbursements due to rising prices.
The mattress fabrics segment manufactures, sources, and sells fabrics and mattress covers primarily to bedding manufacturers. We have mattress fabric operations located in Stokesdale, NC, High Point, NC, and Quebec, Canada. Additionally, we acquired the remaining fifty percent ownership interest in our former unconsolidated joint venture located in Ouanaminthe, Haiti, during the fourth quarter of fiscal 2021.
Additionally, we acquired the remaining fifty percent ownership interest in our former unconsolidated joint venture located in Ouanaminthe, Haiti, during the fourth quarter of fiscal 2021.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeHowever, there is no assurance that we will be able to continually maintain this natural hedge. Our foreign subsidiaries use the U.S. dollar as their functional currency. A substantial portion of the company’s imports purchased outside the U.S. are denominated in U.S. dollars.
Biggest changeWe try to maintain a natural hedge by keeping a balance of our assets and liabilities denominated in the local currency of our subsidiaries domiciled in Canada and China. However, there is no assurance that we will be able to continually maintain this natural hedge. Our foreign subsidiaries use the U.S. dollar as their functional currency.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to market risk from changes in interest rates on our revolving credit agreements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rates We are exposed to market risk from changes in interest rates on our revolving credit agreements.
Effective June 24, 2022, we entered into an amended and restated U.S. revolving credit agreement that requires interest to be charged at a rate that is calculated using an applicable margin over the Federal Reserve Bank of New York’s secured overnight fund rate (SOFR) as defined in the amended and restated U.S. revolving credit agreement.
Effective January 19, 2023, we entered into a second amended and restated U.S. revolving credit agreement (the "Amended Agreement") to establish an asset-based revolving credit facility that required interest to be charged at a rate (applicable interest rate of 6.3% as of April 30, 2023) calculated using an applicable margin over Federal Reserve Bank of New York's secured overnight fund rate (SOFR), as defined in the Amended Agreement.
Our revolving credit lines associated with our operations located in China bear interest at a rate determined by the Chinese government at the time of borrowing. As of May 1, 2022, there were no borrowings outstanding under our revolving credit agreements associated with our operations located in China.
As of April 30, 2023, there were no outstanding borrowings under the Amended Agreement. Our revolving credit line associated with our operations located in China bears interest at a rate determined by the Chinese government at the time of borrowing.
A 10% change in the above exchange rates as of May 1, 2022, would not have materially affected our results of operations or financial position. 43
A substantial portion of the company’s imports purchased outside the U.S. are denominated in U.S. dollars. A 10% change in the above exchange rates as of April 30, 2023, would not have materially affected our results of operations or financial position. 45
We are exposed to market risk from changes in the value of foreign currencies for our subsidiaries domiciled in Canada and China. We try to maintain a natural hedge by keeping a balance of our assets and liabilities denominated in the local currency of our subsidiaries domiciled in Canada and China.
As of April 30, 2023, there were no borrowings outstanding under our revolving credit agreement associated with our operations located in China. Foreign Currency We are exposed to market risk from changes in the value of foreign currencies for our subsidiaries domiciled in Canada and China.
Removed
As of May 1, 2022, our existing U.S. revolving credit agreement required interest to be charged at a rate (applicable interest rate of 2.40%) as a variable spread over LIBOR based on the company’s ratio of debt to EBITDA as defined in the existing U.S. revolving credit agreement.
Removed
As of May 1, 2022, there were no borrowings outstanding under our U.S. revolving credit agreement.

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