Culp Announces Results for First Quarter Fiscal 2022

Culp, Inc. (NYSE: CULP) (together with its consolidated subsidiaries, “CULP”) today reported financial and operating results for the first quarter ended August 1, 2021.

Fiscal 2022 First Quarter Financial Summary

  • Net sales were $83.0 million, up 28.8 percent over the pandemic-impacted prior-year period, with mattress fabrics sales up 19.3 percent and upholstery fabrics sales up 41.0 percent compared with the first quarter of last year.
  • Income from operations (operating income) was $3.3 million, up 76.2 percent compared with income from operations of $1.9 million for the prior-year period.
  • Net income was $2.3 million, or $0.18 per diluted share, compared with a net loss of $(2.7) million, or $(0.22) per diluted share, for the prior-year period, which included a $3.7 million non-cash net income tax charge. Excluding this net income tax charge, adjusted net income (non-GAAP) for the first quarter of last year was $1.0 million, or $0.08 per diluted share. (See reconciliation table at the back of this press release.)
  • The company’s financial position reflected total cash and investments of $44.0 million and no outstanding borrowings as of August 1, 2021. (See summary of cash and investments table at the back of this press release.)
  • Cash flow from operations and free cash flow were $1.6 million and negative $(782,000), respectively, for the first quarter of fiscal 2022. (See reconciliation table at the back of this press release.)
  • The company announced a quarterly cash dividend of $0.11 per share, payable in October. At an annual indicated dividend of $0.44 per share, the yield is 3.34 percent, based upon yesterday’s closing stock price of $13.17 per share.
  • The company repurchased 48,686 shares of Culp common stock during the first quarter of fiscal 2022, and has subsequently repurchased an additional 47,767 shares through August 31, 2021, leaving approximately $3.6 million available under the company’s recently reinstated share repurchase program.

Financial Outlook

  • Although subject to uncertainties, the company is encouraged by the execution of its product-driven strategy and the resilience of its global platform, as well as its expanding market reach. The financial outlook provided for the second quarter of fiscal 2022 is a sequential comparison to the first quarter of fiscal 2022 due to the current inflationary pressures and volatility that were not present during the prior-year period.
  • The company’s net sales and consolidated operating income (income from operations) for the second quarter of fiscal 2022 are expected to be comparable to the first quarter of fiscal 2022.
  • For the full fiscal 2022 year, the company reaffirms its expectations for net sales to continue increasing moderately, with a projected increase between 8 to 12 percent, and for consolidated operating income to increase significantly, with a projected increase between 20 to 25 percent, in each case as compared to fiscal 2021.
  • The company’s expectations for the second quarter and the full fiscal 2022 year are based on information available at the time of this press release and reflect certain assumptions by management regarding the company’s business and trends. The outlook assumes there will be no further pandemic-related shutdowns and no greater-than-expected changes in freight and raw material costs, foreign currency exchange rates, labor availability, recent consumer trends, world events, or other circumstances beyond the company’s control.

Commenting on the results, Iv Culp, president and chief executive officer of Culp, Inc., said, “We are very pleased to report a solid start to fiscal 2022, with overall sales and operating income in line with expectations and sales reaching their highest first quarter level since fiscal 2003. Our results reflect strong top-line growth driven by higher demand for both our mattress and residential upholstery fabric products. In each of our businesses, we executed our product-driven strategy with a continued emphasis on design creativity and innovation. We also benefited from our expanded market share reach and the continued resilience of our flexible global platform. Despite supply chain disruption and pressures on profitability, we are passionately dedicated to servicing the needs of our customers, and both of our divisions have excelled in utilizing our robust platform and long-term supplier relationships to ensure that we meet our customer commitments.

“While we are optimistic about the ongoing strength of our sales trends, we continue to navigate headwinds relating to rising freight and raw material costs, labor shortages, customers’ supply chain constraints for non-fabric components, and other pandemic-related challenges. Our previously implemented price increases for both of our businesses helped offset certain inflationary pressures and foreign currency fluctuations to some extent during the first quarter. We are now implementing further pricing action in both businesses during the second quarter to assist in covering the rapidly increasing freight, raw material, and labor costs.

“Despite these challenges, we continue to invest in our business and expand our capacity. With our diversified manufacturing and sourcing capabilities, along with our innovative products and digital design strategies, we expect to have additional opportunities to capture market share with new and existing customers. We are also excited about the upcoming opening of our new innovation campus in downtown High Point, North Carolina, which will bring together our most innovative and creative minds and foster collaboration among our businesses. Importantly, we have the financial strength to support our business in the current environment, and we believe we are well positioned for continued growth as market conditions evolve,” added Culp.

Segment Update

Mattress Fabrics Segment

Sales for this segment were $43.1 million for the first quarter, up 19.3 percent compared with sales of $36.1 million in the pandemic-impacted first quarter of fiscal 2021. Sales were up 10.8 percent compared with sales of $38.9 million for the pre-pandemic first quarter of fiscal 2020, which also included an extra week.

“We were encouraged by the strong level of sales during the first quarter,” said Sandy Brown, president of the company’s mattress fabrics division. “Our top line performance was driven by the continued strength of our product offerings and was supplemented by the price increase implemented during the first quarter to help offset certain inflationary pressures. We maintained our focus on customer marketing, product innovation, and creative designs during the quarter, and we further expanded our digital design platform to offer enhanced accessibility for our customers. Additionally, demand trends for sewn mattress covers remained strong, as our on-shore, near-shore, and off-shore supply chain strategy, as well as our fabric-to-cover model, continued to provide a preferred platform that provides customers with the agility and value they need for their business.

“We were also pleased with our improved operating performance for the first quarter of fiscal 2022, as compared to the prior-year period. This improvement primarily reflects our solid increase in sales, somewhat offset by increased raw material prices, freight costs, unfavorable foreign currency fluctuations in Canada and China, and inefficiencies due to labor shortages in the U.S. and Canada. As compared to the fourth quarter of fiscal 2021, our improved operating performance was primarily driven by a favorable product mix and the price increase implemented during the first quarter to help cover expected inflationary pressures, but our results were further affected by operating inefficiencies due to labor shortages and additional increases in freight and raw material costs, particularly during the second half of the quarter. We are implementing a surcharge during the second quarter to help offset these pressures, while also continually engaging in cost control measures. However, this surcharge will not take effect until midway through the quarter, resulting in a temporary cost-price lag that will affect our operating performance during the period.

“Looking ahead, we expect that current inflationary conditions, labor shortages, and other near-term headwinds will continue to impact our business during fiscal 2022, but we are confident in our ability to navigate these challenges. We have a compelling business model that supports a sustainable future and allows us to leverage our efficient global platform, innovative products, creative designs, and digital marketing strategies to enhance our leadership position and increase our market share. As demand trends remain strong, we believe our business is well positioned for the long term,” added Brown.

Upholstery Fabrics Segment

Sales for this segment were $40.0 million for the first quarter, up 41.0 percent compared with sales of $28.4 million in the pandemic-impacted first quarter of fiscal 2021. Sales were up 25.5 percent compared with sales of $31.9 million for the pre-pandemic first quarter of fiscal 2020, which also included an extra week.

“We were pleased by the continued strong growth in our sales for the first quarter,” said Boyd Chumbley, president of the company’s upholstery fabrics division. “This growth was driven by a significant increase in our residential business compared to the prior-year period, and was supplemented by our price increase that was effective during the quarter. We continued to benefit from growth in our market share reach, the flexibility of our Asian platform, and the success of our product innovation strategy, including the ongoing popularity of our LiveSmart® portfolio of products. However, our hospitality business, particularly Read Window Products, remained under significant pressure from the ongoing COVID-19 disruption that continues to affect the travel and leisure industries.

“Despite our top line growth, our operating performance for the first quarter of fiscal 2022, as compared to the prior-year period and as compared to the fourth quarter of fiscal 2021, was negatively affected by the dramatic increase in freight costs and by lower sales in our Read Window Products business, as well as start-up costs for our new Haiti facility. Our operating performance as compared to the prior-year period was also pressured by foreign currency fluctuations in China. Our previously implemented price increase has helped offset foreign currency exchange rate fluctuations to some extent, as intended, but we are implementing an additional freight surcharge during the second quarter to help cover the continued rise in freight costs. We also began to see a growing project backlog in our Read Window Products business during the first quarter, but given the typically longer-term (six to nine month) time frame for project installations, there is a temporary lag between the impact of the pandemic-related disruption and improved results for this business.

“We remain encouraged by the strong backlog in our residential upholstery business, reflecting continued favorable demand. We expect that near-term headwinds, including rising freight and labor costs, customer supply chain constraints, and ongoing pandemic-related disruptions such as quarantine and shutdown requirements currently affecting our sourcing partners in Vietnam, may temporarily pressure our business during fiscal 2022. However, with our flexible Asian platform and the upcoming addition of our new Haiti platform, as well as our long-term supplier relationships and our product-driven strategy, we are confident in our ability to navigate these challenges. We believe we are well positioned to sustain and enhance our competitive advantage over the long term as we continue to deliver innovative products that meet the needs of our customers,” added Chumbley.

Balance Sheet

“Maintaining a strong financial position is one of the company’s top priorities,” added Ken Bowling, executive vice president and chief financial officer of Culp, Inc. “As of August 1, 2021, we reported $44.0 million in total cash and investments and no outstanding debt, compared with $47.4 million in total cash and investments and no outstanding debt at the end of the prior-year period. We generated cash flow from operations of $1.6 million and negative free cash flow of $(782,000) for the first three months of fiscal 2022, compared with cash flow from operations of $10.6 million and free cash flow of $10.0 million for the prior-year period. (See reconciliation table at the back of this press release.) As we continue to invest in our business, our cash flow from operations and free cash flow during the first quarter of fiscal 2022 were affected by increased inventory purchases due to higher sales; capital expenditures, including expenditures for machinery, equipment, and IT investments, as well as expenditures related to our new innovation campus; incentive bonus compensation; and payments for the new building lease associated with our Haiti upholstery cut and sew operation.

“During the first quarter, we invested $2.5 million in the business through capital expenditures and payments associated with our new building lease in Haiti, paid $1.4 million in regular quarterly dividends, and spent $723,000 on share repurchases. While we are very pleased with our solid balance sheet going into the second quarter of fiscal 2022, it is important to note that we will continue to utilize our cash for strategic investments in working capital, planned capital expenditures, and investments in Haiti during this period,” added Bowling.

Dividends and Share Repurchases

The company announced that its Board of Directors has approved the payment of a quarterly cash dividend of 11 cents per share. This compares with 10.5 cents per share paid for the same period last year, reflecting an increase of five percent. At an annual indicated dividend of $0.44 per share, the yield is 3.34 percent, based upon yesterday’s closing stock price of $13.17 per share. The next quarterly payment will be made on October 18, 2021, to shareholders of record as of October 11, 2021.

During the first quarter of fiscal 2022, the company repurchased 48,686 shares of Culp common stock in the open market under its existing share repurchase authorization, and subsequently repurchased an additional 47,767 shares through August 31, 2021, leaving approximately $3.6 million available under the current share repurchase program. Shares may be repurchased under the program, at the company’s discretion, from time to time in the open market or in privately negotiated transactions. Pursuant to its capital allocation strategy, the company seeks to opportunistically repurchase shares at a price that reflects a discount to the company’s calculated intrinsic value per share.

Conference Call

Culp, Inc. will hold a conference call to discuss financial results for the first quarter of fiscal 2022 on September 2, 2021, at 11:00 a.m. Eastern Time. A live webcast of this call can be accessed on the investor relations section of the company’s website, www.culp.com. A replay of the webcast will be available for 30 days on the investor relations section of the company’s website, beginning at 2:00 p.m. Eastern Time on September 2, 2021.

About the Company

Culp, Inc. is one of the world’s largest marketers of mattress fabrics for bedding and upholstery fabrics for residential and commercial furniture. The company markets a variety of fabrics to its global customer base of leading bedding and furniture companies, including fabrics produced at Culp’s manufacturing facilities and fabrics sourced through other suppliers. Culp has manufacturing and sourcing capabilities located in the United States, Canada, China, Haiti, Turkey, and Vietnam.

Forward Looking Statements

This release contains “forward-looking statements” within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act of 1995 (Section 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934). Such statements are inherently subject to risks and uncertainties that may cause actual events and results to differ materially from such statements. Further, forward looking statements are intended to speak only as of the date on which they are made, and we disclaim any duty to update such statements to reflect any changes in management’s expectations or any change in the assumptions or circumstances on which such statements are based, whether due to new information, future events, or otherwise. Forward-looking statements are statements that include projections, expectations, or beliefs about future events or results or otherwise are not statements of historical fact. Such statements are often but not always characterized by qualifying words such as “expect,” “believe,” “anticipate,” “estimate,” “intend,” “plan,” “project,” and their derivatives, and include but are not limited to statements about expectations for our future operations, production levels, new product launches, sales, profit margins, profitability, operating income, capital expenditures, working capital levels, income taxes, SG&A or other expenses, pre-tax income, earnings, cash flow, and other performance or liquidity measures, as well as any statements regarding potential acquisitions, future economic or industry trends, public health epidemics, or future developments. There can be no assurance that we will realize these expectations or meet our guidance, or that these beliefs will prove correct.

Factors that could influence the matters discussed in such statements include the level of housing starts and sales of existing homes, consumer confidence, trends in disposable income, and general economic conditions. Decreases in these economic indicators could have a negative effect on our business and prospects. Likewise, increases in interest rates, particularly home mortgage rates, and increases in consumer debt or the general rate of inflation, could affect us adversely. The future performance of our business depends in part on our success in conducting and finalizing acquisition negotiations and integrating acquired businesses into our existing operations. Changes in consumer tastes or preferences toward products not produced by us could erode demand for our products. Changes in tariffs or trade policy, or changes in the value of the U.S. dollar versus other currencies, could affect our financial results because a significant portion of our operations are located outside the United States. Strengthening of the U.S. dollar against other currencies could make our products less competitive on the basis of price in markets outside the United States, and strengthening of currencies in Canada and China can have a negative impact on our sales of products produced in those places. Also, economic or political instability in international areas could affect our operations or sources of goods in those areas, as well as demand for our products in international markets. The impact of public health epidemics on employees, customers, suppliers, and the global economy, such as the global coronavirus pandemic currently affecting countries around the world, could also adversely affect our operations and financial performance. In addition, the impact of potential goodwill or intangible asset impairments could affect our financial results. Finally, increases in market prices for petrochemical products can significantly affect the prices we pay for raw materials, and in turn, increase our operating costs and decrease our profitability. Further information about these factors, as well as other factors that could affect our future operations or financial results and the matters discussed in forward-looking statements, is included in Item 1A “Risk Factors” in our most recent Form 10-K and Form 10-Q reports filed with the Securities and Exchange Commission. A forward-looking statement is neither a prediction nor a guarantee of future events or circumstances, and those future events or circumstances may not occur.

 

CULP, INC.

CONSOLIDATED STATEMENTS OF NET INCOME (LOSS)

FOR THREE MONTHS ENDED AUGUST 1, 2021, AND AUGUST 2, 2020

Unaudited

(Amounts in Thousands, Except for Per Share Data)

 

 

 

THREE MONTHS ENDED

 

 

 

Amount

 

 

 

 

 

 

Percent of Sales

 

 

 

 

 

 

 

(2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

August 1,

 

 

August 2,

 

 

% Over

 

 

August 1,

 

 

August 2,

 

 

 

2021

 

 

2020

 

 

(Under)

 

 

2021

 

 

2020

 

Net sales

 

$

83,047

 

 

 

64,464

 

 

 

28.8

%

 

 

100.0

%

 

 

100.0

%

Cost of sales

 

 

(70,548

)

 

 

(54,563

)

 

 

29.3

%

 

 

84.9

%

 

 

84.6

%

Gross profit

 

 

12,499

 

 

 

9,901

 

 

 

26.2

%

 

 

15.1

%

 

 

15.4

%

Selling, general and administrative

expenses

 

 

(9,181

)

 

 

(8,018

)

 

 

14.5

%

 

 

11.1

%

 

 

12.4

%

Income from operations

 

 

3,318

 

 

 

1,883

 

 

 

76.2

%

 

 

4.0

%

 

 

2.9

%

Interest expense

 

 

 

 

 

(51

)

 

 

(100.0

)%

 

 

0.0

%

 

 

(0.1

)%

Interest income

 

 

74

 

 

 

58

 

 

 

27.6

%

 

 

0.1

%

 

 

0.1

%

Other expense

 

 

(237

)

 

 

(366

)

 

 

(35.2

)%

 

 

0.3

%

 

 

0.6

%

Income before income taxes

 

 

3,155

 

 

 

1,524

 

 

 

107.0

%

 

 

3.8

%

 

 

2.4

%

Income tax expense (1)

 

 

(905

)

 

 

(4,324

)

 

 

(79.1

)%

 

 

28.7

%

 

 

283.7

%

Income from investment in unconsolidated joint venture

 

 

 

 

 

67

 

 

 

(100.0

)%

 

 

0.0

%

 

 

0.1

%

Net income (loss)

 

 

2,250

 

 

 

(2,733

)

 

N.M.

 

 

 

2.7

%

 

 

(4.2

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share - basic

 

$

0.18

 

 

$

(0.22

)

 

N.M.

 

 

 

 

 

 

 

 

 

Net income (loss) per share - diluted

 

$

0.18

 

 

$

(0.22

)

 

N.M.

 

 

 

 

 

 

 

 

 

Average shares outstanding-basic

 

 

12,313

 

 

 

12,287

 

 

 

0.2

%

 

 

 

 

 

 

 

 

Average shares outstanding-diluted

 

 

12,415

 

 

 

12,287

 

 

 

1.0

%

 

 

 

 

 

 

 

 

Notes

(1)

Percent of sales column for income tax expense is calculated as a % of income before income taxes.

 

(2)

See back of this presentation for our Reconciliation of Selected Income Statement Information to Adjusted Results for the three-month period ending August 2, 2020, which includes certain adjustments to income tax expense.

 

CULP, INC.

CONSOLIDATED BALANCE SHEETS

AUGUST 1, 2021, AUGUST 2, 2020, AND MAY 2, 2021

Unaudited

(Amounts in Thousands)

 

 

 

Amounts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Condensed)

 

 

(Condensed)

 

 

 

 

 

 

 

 

 

 

(Condensed)

 

 

 

August 1,

 

 

August 2,

 

 

Increase (Decrease)

 

 

* May 2,

 

 

 

2021

 

 

2020

 

 

Dollars

 

 

Percent

 

 

2021

 

Current assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

26,061

 

 

 

39,986

 

 

 

(13,925

)

 

 

(34.8

)%

 

 

37,009

 

Short-term investments - Held-To-Maturity

 

 

1,661

 

 

 

5,092

 

 

 

(3,431

)

 

 

(67.4

)%

 

 

3,161

 

Short-term investments - Available for Sale

 

 

9,698

 

 

 

983

 

 

 

8,715

 

 

 

886.6

%

 

 

5,542

 

Accounts receivable

 

 

35,008

 

 

 

29,893

 

 

 

5,115

 

 

 

17.1

%

 

 

37,726

 

Inventories

 

 

58,613

 

 

 

40,402

 

 

 

18,211

 

 

 

45.1

%

 

 

55,917

 

Current income taxes receivable

 

 

524

 

 

 

782

 

 

 

(258

)

 

 

(33.0

)%

 

 

 

Other current assets

 

 

3,889

 

 

 

3,547

 

 

 

342

 

 

 

9.6

%

 

 

3,852

 

Total current assets

 

 

135,454

 

 

 

120,685

 

 

 

14,769

 

 

 

12.2

%

 

 

143,207

 

Property, plant & equipment, net

 

 

43,930

 

 

 

42,051

 

 

 

1,879

 

 

 

4.5

%

 

 

44,003

 

Intangible assets

 

 

2,910

 

 

 

3,286

 

 

 

(376

)

 

 

(11.4

)%

 

 

3,004

 

Long-term investments - Rabbi Trust

 

 

8,841

 

 

 

7,916

 

 

 

925

 

 

 

11.7

%

 

 

8,415

 

Long-term investments - Held-To-Maturity

 

 

6,629

 

 

 

1,314

 

 

 

5,315

 

 

 

404.5

%

 

 

1,141

 

Right of use assets

 

 

11,447

 

 

 

6,443

 

 

 

5,004

 

 

 

77.7

%

 

 

11,730

 

Deferred income taxes

 

 

455

 

 

 

593

 

 

 

(138

)

 

 

(23.3

)%

 

 

545

 

Investment in unconsolidated joint venture

 

 

 

 

 

1,759

 

 

 

(1,759

)

 

 

(100.0

)%

 

 

 

Other assets

 

 

2,582

 

 

 

540

 

 

 

2,042

 

 

 

378.1

%

 

 

2,035

 

Total assets

 

$

212,248

 

 

 

184,587

 

 

 

27,661

 

 

 

15.0

%

 

 

214,080

 

Current liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable - trade

 

 

45,285

 

 

 

25,746

 

 

 

19,539

 

 

 

75.9

%

 

 

42,540

 

Accounts payable - capital expenditures

 

 

48

 

 

 

333

 

 

 

(285

)

 

 

(85.6

)%

 

 

348

 

Operating lease liability - current

 

 

2,727

 

 

 

2,387

 

 

 

340

 

 

 

14.2

%

 

 

2,736

 

Deferred revenue

 

 

694

 

 

 

685

 

 

 

9

 

 

 

1.3

%

 

 

540

 

Accrued expenses

 

 

9,950

 

 

 

7,852

 

 

 

2,098

 

 

 

26.7

%

 

 

14,839

 

Income taxes payable - current

 

 

253

 

 

 

613

 

 

 

(360

)

 

 

(58.7

)%

 

 

229

 

Total current liabilities

 

 

58,957

 

 

 

37,616

 

 

 

21,341

 

 

 

56.7

%

 

 

61,232

 

Accrued expenses - long-term

 

 

 

 

 

117

 

 

 

(117

)

 

 

(100.0

)%

 

 

 

Operating lease liability - long-term

 

 

6,665

 

 

 

4,214

 

 

 

2,451

 

 

 

58.2

%

 

 

6,821

 

Income taxes payable - long-term

 

 

3,365

 

 

 

3,591

 

 

 

(226

)

 

 

(6.3

)%

 

 

3,326

 

Deferred income taxes

 

 

4,917

 

 

 

5,311

 

 

 

(394

)

 

 

(7.4

)%

 

 

5,330

 

Deferred compensation

 

 

8,795

 

 

 

7,869

 

 

 

926

 

 

 

11.8

%

 

 

8,365

 

Total liabilities

 

 

82,699

 

 

 

58,718

 

 

 

23,981

 

 

 

40.8

%

 

 

85,074

 

Shareholders' equity

 

 

129,549

 

 

 

125,869

 

 

 

3,680

 

 

 

2.9

%

 

 

129,006

 

Total liabilities and shareholders' equity

 

$

212,248

 

 

 

184,587

 

 

 

27,661

 

 

 

15.0

%

 

 

214,080

 

Shares outstanding

 

 

12,276

 

 

 

12,292

 

 

 

(16

)

 

 

(0.1

)%

 

 

12,313

 

* Derived from audited financial statements.

 

CULP, INC.

SUMMARY OF CASH AND INVESTMENTS

AUGUST 1, 2021, AUGUST 2, 2020, AND MAY 2, 2021

Unaudited

(Amounts in Thousands)

 

 

 

Amounts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

August 1,

 

 

August 2,

 

 

May 2,

 

 

 

2021

 

 

2020

 

 

2021*

 

Cash and Investments

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

26,061

 

 

$

39,986

 

 

$

37,009

 

Short-term investments - Available for Sale

 

 

9,698

 

 

 

983

 

 

 

5,542

 

Short-term investments - Held-To-Maturity

 

 

1,661

 

 

 

5,092

 

 

 

3,161

 

Long-term investments - Held-To-Maturity

 

 

6,629

 

 

 

1,314

 

 

 

1,141

 

Total Cash and Investments

 

$

44,049

 

 

$

47,375

 

 

$

46,853

 

* Derived from audited financial statements.

 

CULP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED AUGUST 1, 2021, AND AUGUST 2, 2020

Unaudited

(Amounts in Thousands)

 

 

 

THREE MONTHS ENDED

 

 

 

Amounts

 

 

 

August 1,

 

 

August 2,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

2,250

 

 

$

(2,733

)

Adjustments to reconcile net income (loss) to net cash provided by

operating activities:

 

 

 

 

 

 

 

 

Depreciation

 

 

1,726

 

 

 

1,822

 

Amortization

 

 

121

 

 

 

118

 

Stock-based compensation

 

 

274

 

 

 

126

 

Deferred income taxes

 

 

(323

)

 

 

3,693

 

Income from investment in unconsolidated joint venture

 

 

 

 

 

(67

)

Foreign currency exchange loss

 

 

3

 

 

 

154

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

2,715

 

 

 

(4,757

)

Inventories

 

 

(2,676

)

 

 

7,592

 

Other current assets

 

 

(39

)

 

 

(1,254

)

Other assets

 

 

(556

)

 

 

(24

)

Accounts payable

 

 

2,723

 

 

 

2,544

 

Deferred revenue

 

 

154

 

 

 

183

 

Accrued expenses and deferred compensation

 

 

(4,336

)

 

 

2,377

 

Income taxes

 

 

(465

)

 

 

807

 

Net cash provided by operating activities

 

 

1,571

 

 

 

10,581

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(1,953

)

 

 

(500

)

Investment in unconsolidated joint venture

 

 

 

 

 

(90

)

Proceeds from the sale of short-term investments (Held to Maturity)

 

 

1,967

 

 

 

350

 

Purchase of short-term and long-term investments (Held to Maturity)

 

 

(5,973

)

 

 

(423

)

Purchase of short-term investments (Available for Sale)

 

 

(4,031

)

 

 

(34

)

Proceeds from the sale of long-term investments (rabbi trust)

 

 

 

 

 

39

 

Purchase of long-term investments (rabbi trust)

 

 

(403

)

 

 

(78

)

Net cash used in investing activities

 

 

(10,393

)

 

 

(736

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Payments associated with lines of credit

 

 

 

 

 

(30,772

)

Payment associated with Paycheck Protection Program Loan

 

 

 

 

 

(7,606

)

Dividends paid

 

 

(1,356

)

 

 

(1,291

)

Common stock repurchased

 

 

(723

)

 

 

 

Common stock surrendered for withholding taxes payable

 

 

(50

)

 

 

 

Payments of debt issuance costs

 

 

 

 

 

(15

)

Net cash used in financing activities

 

 

(2,129

)

 

 

(39,684

)

Effect of exchange rate changes on cash and cash equivalents

 

 

3

 

 

 

35

 

Decrease in cash and cash equivalents

 

 

(10,948

)

 

 

(29,804

)

Cash and cash equivalents at beginning of year

 

 

37,009

 

 

 

69,790

 

Cash and cash equivalents at end of period

 

$

26,061

 

 

$

39,986

 

Free Cash Flow (1)

 

$

(782

)

 

$

9,987

 

Reconciliation of Free Cash Flow (1):

 

 

FY 2022

 

 

FY 2021

 

A) Net cash provided by operating activities

 

$

1,571

 

 

 

10,581

 

B) Minus: Capital Expenditures

 

 

(1,953

)

 

 

(500

)

C) Minus: Investment in unconsolidated joint venture

 

 

 

 

 

(90

)

D) Plus: Proceeds from the sale of long-term investments (rabbi trust)

 

 

 

 

 

39

 

E) Minus: Purchase of long-term investments (rabbi trust)

 

 

(403

)

 

 

(78

)

F) Effects of exchange rate changes on cash and cash equivalents

 

 

3

 

 

 

35

 

Free Cash Flow

 

$

(782

)

 

 

9,987

 

 

CULP, INC.

STATEMENTS OF OPERATIONS BY SEGMENT

FOR THE THREE MONTHS ENDED August 1, 2021, AND AUGUST 2, 2020

Unaudited

(Amounts in Thousands)

 

 

 

THREE MONTHS ENDED

 

 

 

Amounts

 

 

 

 

 

 

Percent of Total Sales

 

 

 

August 1,

 

 

August 2,

 

 

% Over

 

 

August 1,

 

 

August 2,

 

Net Sales by Segment

 

2021

 

 

2020

 

 

(Under)

 

 

2021

 

 

2020

 

Mattress Fabrics

 

$

43,058

 

 

 

36,103

 

 

 

19.3

%

 

 

51.8

%

 

 

56.0

%

Upholstery Fabrics

 

 

39,989

 

 

 

28,361

 

 

 

41.0

%

 

 

48.2

%

 

 

44.0

%

Net Sales

 

$

83,047

 

 

 

64,464

 

 

 

28.8

%

 

 

100.0

%

 

 

100.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit Margin

 

Mattress Fabrics

 

$

6,795

 

 

 

4,608

 

 

 

47.5

%

 

 

15.8

%

 

 

12.8

%

Upholstery Fabrics

 

 

5,704

 

 

 

5,293

 

 

 

7.8

%

 

 

14.3

%

 

 

18.7

%

Gross Profit

 

$

12,499

 

 

 

9,901

 

 

 

26.2

%

 

 

15.1

%

 

 

15.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, General and Administrative

Expenses by Segment

 

 

 

 

 

 

 

 

 

 

 

 

 

Percent of Sales

 

Mattress Fabrics

 

$

3,184

 

 

 

2,763

 

 

 

15.2

%

 

 

7.4

%

 

 

7.7

%

Upholstery Fabrics

 

 

3,437

 

 

 

3,180

 

 

 

8.1

%

 

 

8.6

%

 

 

11.2

%

Unallocated Corporate expenses

 

 

2,560

 

 

 

2,075

 

 

 

23.4

%

 

 

3.1

%

 

 

3.2

%

Selling, General and Administrative

Expenses

 

$

9,181

 

 

 

8,018

 

 

 

14.5

%

 

 

11.1

%

 

 

12.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from operations by Segment

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income Margin

 

Mattress Fabrics

 

$

3,611

 

 

 

1,845

 

 

 

95.7

%

 

 

8.4

%

 

 

5.1

%

Upholstery Fabrics

 

 

2,267

 

 

 

2,113

 

 

 

7.3

%

 

 

5.7

%

 

 

7.5

%

Unallocated corporate expenses

 

 

(2,560

)

 

 

(2,075

)

 

 

23.4

%

 

 

(3.1

)%

 

 

(3.2

)%

Income from Operations

 

$

3,318

 

 

 

1,883

 

 

 

76.2

%

 

 

4.0

%

 

 

2.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on Capital (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mattress Fabrics

 

 

19.6

%

 

 

5.8

%

 

 

237.9

%

 

 

 

 

 

 

 

 

Upholstery Fabrics

 

 

74.3

%

 

 

46.1

%

 

 

61.2

%

 

 

 

 

 

 

 

 

Unallocated Corporate

 

N.M.

 

 

N.M.

 

 

N.M.

 

 

 

 

 

 

 

 

 

Consolidated

 

 

15.5

%

 

 

4.6

%

 

 

237.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital Employed (1) (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mattress Fabrics

 

$

75,118

 

 

 

64,572

 

 

 

16.3

%

 

 

 

 

 

 

 

 

Upholstery Fabrics

 

 

15,634

 

 

 

17,595

 

 

 

(11.1

)%

 

 

 

 

 

 

 

 

Unallocated Corporate

 

 

2,258

 

 

 

4,420

 

 

 

(48.9

)%

 

 

 

 

 

 

 

 

Consolidated

 

$

93,010

 

 

 

86,587

 

 

 

7.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation Expense by Segment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mattress Fabrics

 

$

1,521

 

 

 

1,631

 

 

 

(6.7

)%

 

 

 

 

 

 

 

 

Upholstery Fabrics

 

 

205

 

 

 

191

 

 

 

7.3

%

 

 

 

 

 

 

 

 

Depreciation Expense

 

$

1,726

 

 

 

1,822

 

 

 

(5.3

)%

 

 

 

 

 

 

 

 

Notes

(1)

See return on capital pages at the back of this presentation for calculations.

 

(2)

The capital employed balances are as of August 1, 2021, and August 2, 2020.

 

CULP, INC.

RECONCILIATION OF SELECTED INCOME STATEMENT INFORMATION TO ADJUSTED RESULTS

FOR THE THREE MONTHS ENDED AUGUST 2, 2020

Unaudited

(Amounts in Thousands, Except for Per Share Data)

 

 

 

As Reported

 

 

 

 

 

 

August 2, 2020

 

 

 

August 2,

 

 

 

 

 

 

Adjusted

 

 

 

2020

 

 

Adjustments

 

 

Results

 

Income before income taxes

 

$

1,524

 

 

 

 

 

 

1,524

 

Income tax expense (1)

 

 

(4,324

)

 

 

3,691

 

 

 

(633

)

Income from investment in

unconsolidated joint venture

 

67

 

 

 

 

 

 

67

 

Net (loss) income

 

$

(2,733

)

 

 

3,691

 

 

 

958

 

Net (loss) income per share - basic

 

$

(0.22

)

 

 

 

 

 

$

0.08

 

Net (loss) income per share - diluted

 

$

(0.22

)

 

 

 

 

 

$

0.08

 

Average shares outstanding-basic

 

 

12,287

 

 

 

 

 

 

 

12,287

 

Average shares outstanding-diluted

 

 

12,287

 

 

 

 

 

 

 

12,294

 

Notes

(1)

The $3.7 million adjustment represents a $7.2 million non-cash income tax charge to record a full valuation allowance against the company’s U.S. net deferred income tax assets, partially offset by a $3.5 million non-cash income tax benefit resulting from the re-establishment of certain U.S. Federal net operating loss carryforwards in connection with U.S. Treasury regulations enacted during our first quarter of fiscal 2020 regarding Global Intangible Low Taxed Income (“GILTI”) tax provisions of the Tax Cuts and Jobs Act of 2017.

CULP, INC.

CONSOLIDATED STATEMENTS OF ADJUSTED EBITDA

FOR THE TWELVE MONTHS ENDED AUGUST 1, 2021, AND AUGUST 2, 2020

Unaudited

(Amounts in Thousands)

 

 

 

Quarter

Ended

 

 

Quarter

Ended

 

 

Quarter

Ended

 

 

Quarter

Ended

 

 

Trailing

12 Months

 

 

 

November 1,

 

 

January 31,

 

 

May 2,

 

 

August 1,

 

 

August 1,

 

 

 

2020

 

 

2021

 

 

2021

 

 

2021

 

 

2021

 

Net income

 

$

2,384

 

 

$

2,082

 

 

$

1,485

 

 

$

2,250

 

 

$

8,201

 

Income tax expense

 

 

1,613

 

 

 

899

 

 

 

857

 

 

 

905

 

 

 

4,274

 

Interest income, net

 

 

(59

)

 

 

(90

)

 

 

(36

)

 

 

(74

)

 

 

(259

)

Gain on bargain purchase

 

 

 

 

 

 

 

 

(819

)

 

 

 

 

 

(819

)

Depreciation expense

 

 

1,716

 

 

 

1,665

 

 

 

1,643

 

 

 

1,726

 

 

 

6,750

 

Amortization expense

 

 

117

 

 

 

115

 

 

 

116

 

 

 

121

 

 

 

469

 

Stock based compensation

 

 

348

 

 

 

292

 

 

 

485

 

 

 

274

 

 

 

1,399

 

Adjusted EBITDA

 

$

6,119

 

 

$

4,963

 

 

$

3,731

 

 

$

5,202

 

 

$

20,015

 

% Net Sales

 

 

8.0

%

 

 

6.3

%

 

 

4.7

%

 

 

6.3

%

 

 

6.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter

Ended

 

 

Quarter

Ended

 

 

Quarter

Ended

 

 

Quarter

Ended

 

 

Trailing

12 Months

 

 

 

November 3,

 

 

February 2,

 

 

May 3,

 

 

August 2,

 

 

August 2,

 

 

 

2019

 

 

2020

 

 

2020

 

 

2020

 

 

2020

 

Net income (loss)

 

$

2,192

 

 

$

(4,207

)

 

$

(27,825

)

 

$

(2,733

)

 

$

(32,573

)

Loss before income taxes from

discontinued operation

 

 

441

 

 

 

7,824

 

 

 

8,698

 

 

 

 

 

 

16,963

 

Income tax expense (benefit) from

continuing operations

 

 

2,279

 

 

 

1,619

 

 

 

(2,237

)

 

 

4,324

 

 

 

5,985

 

Interest income, net

 

 

(237

)

 

 

(258

)

 

 

(37

)

 

 

(7

)

 

 

(539

)

Asset impairments from continuing

operations

 

 

 

 

 

 

 

 

13,712

 

 

 

 

 

 

13,712

 

Restructuring credit

 

 

 

 

 

(35

)

 

 

 

 

 

 

 

 

(35

)

Depreciation expense - continuing

operations

 

 

1,893

 

 

 

1,891

 

 

 

1,882

 

 

 

1,822

 

 

 

7,488

 

Amortization expense - continuing

operations

 

 

102

 

 

 

102

 

 

 

117

 

 

 

118

 

 

 

439

 

Stock based compensation

 

 

313

 

 

 

364

 

 

 

(199

)

 

 

126

 

 

 

604

 

Adjusted EBITDA

 

$

6,983

 

 

$

7,300

 

 

$

(5,889

)

 

$

3,650

 

 

$

12,044

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

% Net Sales

 

 

10.0

%

 

 

10.7

%

 

 

(12.4

)%

 

 

5.7

%

 

 

4.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

% Over (Under)

 

 

(12.4

)%

 

 

(32.0

)%

 

N.M.

 

 

 

42.5

%

 

 

66.2

%

 

CULP, INC.

RETURN ON CAPITAL EMPLOYED BY SEGMENT

FOR THE TWELVE MONTHS ENDED AUGUST 1, 2021

Unaudited

(Amounts in Thousands)

 

 

Adjusted

Operating Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Twelve Months

 

Average

 

Return on

 

 

 

 

 

 

 

 

 

 

 

 

 

Ended

 

Capital

 

Avg. Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

August 2, 2021 (1)

 

Employed (3)

 

Employed (2)

 

 

 

 

 

 

 

 

 

 

 

 

Mattress Fabrics

$

13,564

 

$

69,246

 

 

19.6

%

 

 

 

 

 

 

 

 

 

 

 

Upholstery Fabrics

 

12,030

 

 

16,195

 

 

74.3

%

 

 

 

 

 

 

 

 

 

 

 

Unallocated Corporate

 

(12,082

)

 

1,905

 

N.M.

 

 

 

 

 

 

 

 

 

 

 

 

Total

$

13,512

 

$

87,347

 

 

15.5

%

 

 

 

 

 

 

 

 

 

 

 

Average Capital Employed

As of the three Months Ended

August 1, 2021

 

 

As of the three Months Ended

May 2, 2021

 

 

As of the three Months Ended

January 31, 2021

 

 

Mattress

 

Upholstery

 

Unallocated

 

 

 

 

 

Mattress

 

Upholstery

 

Unallocated

 

 

 

 

 

Mattress

 

Upholstery

 

Unallocated

 

 

 

 

 

Fabrics

 

Fabrics

 

Corporate

 

Total

 

 

Fabrics

 

Fabrics

 

Corporate

 

Total

 

 

Fabrics

 

Fabrics

 

Corporate

 

Total

 

Total assets (4)

$

96,416

 

 

55,617

 

 

60,215

 

 

212,248

 

 

$

97,431

 

 

54,305

 

 

62,344

 

 

214,080

 

 

$

91,412

 

 

53,233

 

 

67,333

 

 

211,978

 

Total liabilities

 

(21,298

)

 

(39,983

)

 

(21,418

)

 

(82,699

)

 

 

(22,410

)

 

(38,709

)

 

(23,955

)

 

(85,074

)

 

 

(21,503

)

 

(38,061

)

 

(24,052

)

 

(83,616

)

Subtotal

$

75,118

 

$

15,634

 

$

38,797

 

$

129,549

 

 

$

75,021

 

$

15,596

 

$

38,389

 

$

129,006

 

 

$

69,909

 

$

15,172

 

$

43,281

 

$

128,362

 

Cash and cash equivalents

 

 

 

 

 

(26,061

)

 

(26,061

)

 

 

 

 

 

 

(37,009

)

 

(37,009

)

 

 

 

 

 

 

(35,987

)

 

(35,987

)

Short-term investments - Available-For-

Sale

 

 

 

 

 

(9,698

)

 

(9,698

)

 

 

 

 

 

 

(5,542

)

 

(5,542

)

 

 

 

 

 

 

(5,548

)

 

(5,548

)

Short-term investments - Held-To-

Maturity

 

 

 

 

 

(1,661

)

 

(1,661

)

 

 

 

 

 

 

(3,161

)

 

(3,161

)

 

 

 

 

 

 

(9,785

)

 

(9,785

)

Current income taxes receivable

 

 

 

 

 

(524

)

 

(524

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term investments - Held-To-Maturity

 

 

 

 

 

(6,629

)

 

(6,629

)

 

 

 

 

 

 

(1,141

)

 

(1,141

)

 

 

 

 

 

 

(512

)

 

(512

)

Long-term investments - Rabbi Trust

 

 

 

 

 

(8,841

)

 

(8,841

)

 

 

 

 

 

 

(8,415

)

 

(8,415

)

 

 

 

 

 

 

(8,232

)

 

(8,232

)

Deferred income taxes - non-current

 

 

 

 

 

(455

)

 

(455

)

 

 

 

 

 

 

(545

)

 

(545

)

 

 

 

 

 

 

(640

)

 

(640

)

Income taxes payable - current

 

 

 

 

 

253

 

 

253

 

 

 

 

 

 

 

229

 

 

229

 

 

 

 

 

 

 

1,129

 

 

1,129

 

Income taxes payable - long-term

 

 

 

 

 

3,365

 

 

3,365

 

 

 

 

 

 

 

3,326

 

 

3,326

 

 

 

 

 

 

 

3,325

 

 

3,325

 

Deferred income taxes - non-current

 

 

 

 

 

4,917

 

 

4,917

 

 

 

 

 

 

 

5,330

 

 

5,330

 

 

 

 

 

 

 

5,543

 

 

5,543

 

Deferred compensation

 

 

 

 

 

8,795

 

 

8,795

 

 

 

 

 

 

 

8,365

 

 

8,365

 

 

 

 

 

 

 

8,179

 

 

8,179

 

Total Capital Employed

$

75,118

 

$

15,634

 

$

2,258

 

$

93,010

 

 

$

75,021

 

$

15,596

 

$

(174

)

$

90,443

 

 

$

69,909

 

$

15,172

 

$

753

 

$

85,834

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CULP, INC.

RETURN ON CAPITAL EMPLOYED BY SEGMENT - CONTINUED

FOR THE TWELVE MONTHS ENDED AUGUST 1, 2021

Unaudited

(Amounts in Thousands)

 

 

As of the three Months Ended November 1, 2020

 

 

As of the three Months Ended August 2, 2020

 

 

Mattress

 

Upholstery

 

Unallocated

 

 

 

 

 

Mattress

 

Upholstery

 

Unallocated

 

 

 

 

 

Fabrics

 

Fabrics

 

Corporate

 

Total

 

 

Fabrics

 

Fabrics

 

Corporate

 

Total

 

Total assets (4)

$

83,237

 

 

47,267

 

 

72,272

 

 

202,776

 

 

$

79,016

 

 

41,239

 

 

64,332

 

 

184,587

 

Total liabilities

 

(21,628

)

 

(30,287

)

 

(23,610

)

 

(75,525

)

 

 

(14,444

)

 

(23,644

)

 

(20,630

)

 

(58,718

)

Subtotal

$

61,609

 

$

16,980

 

$

48,662

 

$

127,251

 

 

$

64,572

 

$

17,595

 

$

43,702

 

$

125,869

 

Cash and cash equivalents

 

 

 

 

 

(45,288

)

 

(45,288

)

 

 

 

 

 

 

(39,986

)

 

(39,986

)

Short-term investments - Available-For-

Sale

 

 

 

 

 

(5,462

)

 

(5,462

)

 

 

 

 

 

 

(983

)

 

(983

)

Short-term investments - Held-To-

Maturity

 

 

 

 

 

(5,005

)

 

(5,005

)

 

 

 

 

 

 

(5,092

)

 

(5,092

)

Current income taxes receivable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(782

)

 

(782

)

Long-term investments - Held-To-Maturity

 

 

 

 

 

(759

)

 

(759

)

 

 

 

 

 

 

(1,314

)

 

(1,314

)

Long-term investments - Rabbi Trust

 

 

 

 

 

(8,060

)

 

(8,060

)

 

 

 

 

 

 

(7,916

)

 

(7,916

)

Deferred income taxes - non-current

 

 

 

 

 

(645

)

 

(645

)

 

 

 

 

 

 

(593

)

 

(593

)

Income taxes payable - current

 

 

 

 

 

1,413

 

 

1,413

 

 

 

 

 

 

 

613

 

 

613

 

Income taxes payable - long-term

 

 

 

 

 

3,325

 

 

3,325

 

 

 

 

 

 

 

3,591

 

 

3,591

 

Deferred income taxes - non-current

 

 

 

 

 

6,089

 

 

6,089

 

 

 

 

 

 

 

5,311

 

 

5,311

 

Deferred compensation

 

 

 

 

 

8,000

 

 

8,000

 

 

 

 

 

 

 

7,869

 

 

7,869

 

Total Capital Employed

$

61,609

 

$

16,980

 

$

2,270

 

$

80,859

 

 

$

64,572

 

$

17,595

 

$

4,420

 

$

86,587

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mattress

 

Upholstery

 

Unallocated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fabrics

 

Fabrics

 

Corporate

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Capital Employed (3)

$

69,246

 

$

16,195

 

$

1,905

 

$

87,347

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notes

(1)

See last page of this presentation for calculation.

(2)

Return on average capital employed represents the last twelve months operating income as of August 1, 2021, divided by average capital employed. Average capital employed does not include cash and cash equivalents, short-term investments Available-For-Sale, and short-term and long-term investments Held-To-Maturity, long-term investments – Rabbi Trust, income taxes receivable and payable, noncurrent deferred income tax assets and liabilities, and deferred compensation.

(3)

Average capital employed was computed using the five quarterly periods ending August 1, 2021, May 2, 2021, January 31, 2021, November 1, 2020, and August 2, 2020.

(4)

Intangible assets are included in unallocated corporate for all periods presented and therefore, have no effect on capital employed and return on capital employed for our mattress fabrics and upholstery fabrics segments.

 

CULP INC.

RETURN ON CAPITAL EMPLOYED BY SEGMENT

FOR THE TWELVE MONTHS ENDED AUGUST 2, 2020

Unaudited

(Amounts in Thousands)

 

 

Adjusted

Operating Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Twelve Months

 

Average

 

Return on

 

 

 

 

 

 

 

 

 

 

 

 

 

Ended

 

Capital

 

Avg. Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

August 2, 2020 (1)

 

Employed (3)

 

Employed (2)

 

 

 

 

 

 

 

 

 

 

 

 

Mattress Fabrics

$

4,153

 

$

71,209

 

 

5.8

%

 

 

 

 

 

 

 

 

 

 

 

Upholstery Fabrics

 

9,106

 

 

19,758

 

 

46.1

%

 

 

 

 

 

 

 

 

 

 

 

Unallocated Corporate

 

(8,560

)

 

10,180

 

N.M.

 

 

 

 

 

 

 

 

 

 

 

 

Total

$

4,699

 

$

101,146

 

 

4.6

%

 

 

 

 

 

 

 

 

 

 

 

Average Capital Employed

As of the three Months

Ended August 2, 2020

 

 

As of the three Months

Ended May 3, 2020

 

 

As of the three Months

Ended February 2, 2020

 

 

Mattress

 

Upholstery

 

Unallocated

 

 

 

 

 

Mattress

 

Upholstery

 

Unallocated

 

 

 

 

 

Mattress

 

Upholstery

 

Unallocated

 

 

 

 

 

Fabrics

 

Fabrics

 

Corporate

 

Total

 

 

Fabrics

 

Fabrics

 

Corporate

 

Total

 

 

Fabrics

 

Fabrics

 

Corporate

 

Total

 

Total assets (4)

$

79,016

 

 

41,239

 

 

64,332

 

 

184,587

 

 

$

82,060

 

 

38,517

 

 

94,507

 

 

215,084

 

 

$

88,641

 

 

42,248

 

 

81,251

 

 

212,140

 

Total liabilities (5)

 

(14,444

)

 

(23,644

)

 

(20,630

)

 

(58,718

)

 

 

(9,239

)

 

(20,908

)

 

(55,239

)

 

(85,386

)

 

 

(11,586

)

 

(18,179

)

 

(22,279

)

 

(52,044

)

Subtotal

$

64,572

 

$

17,595

 

$

43,702

 

$

125,869

 

 

$

72,821

 

$

17,609

 

$

39,268

 

$

129,698

 

 

$

77,055

 

$

24,069

 

$

58,972

 

$

160,096

 

Cash and cash equivalents

 

 

 

 

 

(39,986

)

 

(39,986

)

 

 

 

 

 

 

(69,790

)

 

(69,790

)

 

 

 

 

 

 

(21,640

)

 

(21,640

)

Short-term investments - Available-For-Sale

 

 

 

 

 

(983

)

 

(983

)

 

 

 

 

 

 

(923

)

 

(923

)

 

 

 

 

 

 

(7,580

)

 

(7,580

)

Short-term investments - Held-To-Maturity

 

 

 

 

 

(5,092

)

 

(5,092

)

 

 

 

 

 

 

(4,271

)

 

(4,271

)

 

 

 

 

 

 

(3,171

)

 

(3,171

)

Current income taxes receivable

 

 

 

 

 

(782

)

 

(782

)

 

 

 

 

 

 

(1,585

)

 

(1,585

)

 

 

 

 

 

 

(776

)

 

(776

)

Current assets - Discontinued Operation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,738

)

 

(4,738

)

Long-term investments - Held-To-Maturity

 

 

 

 

 

(1,314

)

 

(1,314

)

 

 

 

 

 

 

(2,076

)

 

(2,076

)

 

 

 

 

 

 

(2,224

)

 

(2,224

)

Long-term investments - Rabbi Trust

 

 

 

 

 

(7,916

)

 

(7,916

)

 

 

 

 

 

 

(7,834

)

 

(7,834

)

 

 

 

 

 

 

(7,804

)

 

(7,804

)

Noncurrent income taxes receivable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(733

)

 

(733

)

Deferred income taxes - non-current

 

 

 

 

 

(593

)

 

(593

)

 

 

 

 

 

 

(793

)

 

(793

)

 

 

 

 

 

 

(920

)

 

(920

)

Long-term note receivable affiliated with

discontinued operation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,800

)

 

(1,800

)

Noncurrent assets - Discontinued Operation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,241

)

 

(9,241

)

Line of credit - China operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,015

 

 

1,015

 

 

 

 

 

 

 

 

 

 

Paycheck Protection Program Loan

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7,606

 

 

7,606

 

 

 

 

 

 

 

 

 

 

Current liabilities - Discontinued Operation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,094

 

 

2,094

 

Income taxes payable - current

 

 

 

 

 

613

 

 

613

 

 

 

 

 

 

 

395

 

 

395

 

 

 

 

 

 

 

455

 

 

455

 

Line of credit - U.S. operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

29,750

 

 

29,750

 

 

 

 

 

 

 

 

 

 

Income taxes payable - long-term

 

 

 

 

 

3,591

 

 

3,591

 

 

 

 

 

 

 

3,796

 

 

3,796

 

 

 

 

 

 

 

3,442

 

 

3,442

 

Deferred income taxes - non-current

 

 

 

 

 

5,311

 

 

5,311

 

 

 

 

 

 

 

1,818

 

 

1,818

 

 

 

 

 

 

 

2,013

 

 

2,013

 

Deferred compensation

 

 

 

 

 

7,869

 

 

7,869

 

 

 

 

 

 

 

7,720

 

 

7,720

 

 

 

 

 

 

 

7,637

 

 

7,637

 

Noncurrent liabilities - Discontinued Operation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,501

 

 

3,501

 

Non-controlling interest - Discontinued Operation

 

 

 

 

 

 

 

-

 

 

 

 

 

 

 

 

 

-

 

 

 

 

 

 

 

(253

)

 

(253

)

Total Capital Employed

$

64,572

 

$

17,595

 

$

4,420

 

$

86,587

 

 

$

72,821

 

$

17,609

 

$

4,096

 

$

94,526

 

 

$

77,055

 

$

24,069

 

$

17,234

 

$

118,358

 

CULP INC.

RETURN ON CAPITAL EMPLOYED BY SEGMENT - CONTINUED

FOR THE TWELVE MONTHS ENDED AUGUST 2, 2020

Unaudited

(Amounts in Thousands)

 

 

As of the three Months Ended November 3, 2019

 

 

As of the three Months Ended August 4, 2019

 

 

Mattress

 

Upholstery

 

Unallocated

 

 

 

 

 

Mattress

 

Upholstery

 

Unallocated

 

 

 

 

 

Fabrics

 

Fabrics

 

Corporate

 

Total

 

 

Fabrics

 

Fabrics

 

Corporate

 

Total

 

Total assets (4)

$

84,473

 

 

43,313

 

 

105,736

 

 

233,522

 

 

$

83,056

 

 

40,456

 

 

102,735

 

 

226,247

 

Total liabilities (5)

 

(14,079

)

 

(23,902

)

 

(29,619

)

 

(67,600

)

 

 

(11,852

)

 

(20,352

)

 

(29,707

)

 

(61,911

)

Subtotal

$

70,394

 

$

19,411

 

$

76,117

 

$

165,922

 

 

$

71,204

 

$

20,104

 

$

73,028

 

$

164,336

 

Cash and cash equivalents

 

 

 

 

 

(46,955

)

 

(46,955

)

 

 

 

 

 

 

(44,236

)

 

(44,236

)

Current income taxes receivable

 

 

 

 

 

(776

)

 

(776

)

 

 

 

 

 

 

(776

)

 

(776

)

Current assets - Discontinued Operation

 

 

 

 

 

(4,760

)

 

(4,760

)

 

 

 

 

 

 

(3,557

)

 

(3,557

)

Long-term investments - Rabbi Trust

 

 

 

 

 

(7,575

)

 

(7,575

)

 

 

 

 

 

 

(7,347

)

 

(7,347

)

Noncurrent income taxes receivable

 

 

 

 

 

(733

)

 

(733

)

 

 

 

 

 

 

(733

)

 

(733

)

Deferred income taxes - non-current

 

 

 

 

 

(511

)

 

(511

)

 

 

 

 

 

 

(486

)

 

(486

)

Long-term note receivable affliated with

discontinued operation

 

 

 

 

 

(1,800

)

 

(1,800

)

 

 

 

 

 

 

(1,800

)

 

(1,800

)

Noncurrent assets - Discontinued Operation

 

 

 

 

 

(22,950

)

 

(22,950

)

 

 

 

 

 

 

(23,058

)

 

(23,058

)

Current liabilities - Discontinued Operation

 

 

 

 

 

1,907

 

 

1,907

 

 

 

 

 

 

 

1,431

 

 

1,431

 

Income taxes payable - current

 

 

 

 

 

1,539

 

 

1,539

 

 

 

 

 

 

 

1,116

 

 

1,116

 

Contingent consideration affiliated with

discontinued operation

 

 

 

 

 

6,006

 

 

6,006

 

 

 

 

 

 

 

5,931

 

 

5,931

 

Income taxes payable - long-term

 

 

 

 

 

3,442

 

 

3,442

 

 

 

 

 

 

 

3,640

 

 

3,640

 

Deferred income taxes - non-current

 

 

 

 

 

3,283

 

 

3,283

 

 

 

 

 

 

 

2,543

 

 

2,543

 

Deferred compensation

 

 

 

 

 

7,429

 

 

7,429

 

 

 

 

 

 

 

7,232

 

 

7,232

 

Noncurrent liabilities - Discontinued Operation

 

 

 

 

 

3,550

 

 

3,550

 

 

 

 

 

 

 

3,599

 

 

3,599

 

Non-controlling interest - Discontinued Operation

 

 

 

 

 

(4,402

)

 

(4,402

)

 

 

 

 

 

 

(4,190

)

 

(4,190

)

Total Capital Employed

$

70,394

 

$

19,411

 

$

12,811

 

$

102,616

 

 

$

71,204

 

$

20,104

 

$

12,337

 

$

103,645

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mattress

 

Upholstery

 

Unallocated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fabrics

 

Fabrics

 

Corporate

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Capital Employed (3)

$

71,209

 

$

19,758

 

$

10,180

 

$

101,146

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notes

(1)

See last page of this presentation for calculation.

(2)

Return on average capital employed represents the last twelve months operating income as of August 1, 2021, divided by average capital employed. Average capital employed does not include cash and cash equivalents, short-term investments Available-For-Sale, and short-term and long-term investments Held-To-Maturity, long-term investments – Rabbi Trust, income taxes receivable and payable, noncurrent deferred income tax assets and liabilities, deferred compensation, lines of credit associated with our U.S. and China operations, Paycheck Protection Program loan, long-term note receivable affiliated with discontinued operation, current and noncurrent assets – Discontinued Operation, current and non-current liabilities- Discontinued Operation, contingent consideration affiliated with discontinued operation, and non-controlling interest- Discontinued Operation.

(3)

Average capital employed was computed using the five quarterly periods ending August 2, 2020, May 3, 2020, February 2, 2020, November 2, 2019, and August 4, 2019.

(4)

Intangible assets and goodwill are included in unallocated corporate for all periods presented and therefore, have no effect on capital employed and return on capital employed for our mattress fabrics and upholstery fabrics segments.

(5)

Accrued restructuring costs and certain obligations associated with an acquisition are included in unallocated corporate for all periods presented and therefore, have no effect on capital employed and return on capital employed for our mattress fabrics and upholstery fabrics segments.

 

CULP INC.

CONSOLIDATED STATEMENTS OF ADJUSTED OPERATING INCOME (LOSS)

FOR THE TWELVE MONTHS ENDED AUGUST 1, 2021, AND AUGUST 2, 2020

Unaudited

(Amounts in Thousands)

 

 

 

Quarter Ended

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trailing 12

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Months

 

 

 

11/1/2020

 

 

1/31/2021

 

 

5/2/2021

 

 

8/1/2021

 

 

8/1/2021

 

Mattress Fabrics

 

$

4,382

 

 

$

3,297

 

 

$

2,274

 

 

$

3,611

 

 

$

13,564

 

Upholstery Fabrics

 

 

3,287

 

 

 

3,863

 

 

 

2,613

 

 

 

2,267

 

 

 

12,030

 

Unallocated Corporate

 

 

(3,151

)

 

 

(3,123

)

 

 

(3,248

)

 

 

(2,560

)

 

 

(12,082

)

Operating income

 

$

4,518

 

 

$

4,037

 

 

$

1,639

 

 

$

3,318

 

 

$

13,512

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trailing 12

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Months

 

 

 

11/3/2019

 

 

2/2/2020

 

 

5/3/2020

 

 

8/2/2020

 

 

8/2/2020

 

Mattress Fabrics

 

$

3,294

 

 

$

1,778

 

 

$

(2,764

)

 

$

1,845

 

 

$

4,153

 

Upholstery Fabrics

 

 

3,473

 

 

 

3,030

 

 

 

490

 

 

 

2,113

 

 

 

9,106

 

Unallocated Corporate

 

 

(2,358

)

 

 

(2,119

)

 

 

(2,008

)

 

 

(2,075

)

 

 

(8,560

)

Subtotal

 

$

4,409

 

 

$

2,689

 

 

$

(4,282

)

 

$

1,883

 

 

$

4,699

 

Asset Impairments

 

 

 

 

 

 

 

 

(13,712

)

 

 

 

 

 

(13,712

)

Restructuring credit

 

 

 

 

 

35

 

 

 

 

 

 

 

 

 

35

 

Operating income

 

$

4,409

 

 

$

2,724

 

 

$

(17,994

)

 

$

1,883

 

 

$

(8,978

)

% Over (Under)

 

 

2.5

%

 

 

48.2

%

 

 

(109.1

)%

 

 

76.2

%

 

 

(250.5

)%

 

Contacts

Investor Contact:

Kenneth R. Bowling

Chief Financial Officer

336-881-5630



Media Contact:

Teresa A. Huffman

Senior Vice President, Human Resources

336-889-5161

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