Culp Announces Results and Strengthened Liquidity for First Quarter Fiscal 2021, Announces Quarterly Dividend

HIGH POINT, N.C.--()--Culp, Inc. (NYSE: CULP) today reported financial and operating results for the first quarter ended August 2, 2020, which were materially affected by the coronavirus (“COVID-19”) pandemic. Additionally, the first quarter of fiscal 2021 included 13 weeks compared with 14 weeks for the first quarter of fiscal 2020.

Fiscal 2021 First Quarter Financial Summary(1)

  • Net sales were $64.5 million, down 8.8 percent over the prior-year period, with mattress fabric sales down 7.1 percent and upholstery fabric sales down 11.0 percent compared with the first quarter of last year.
  • Pre-tax income from continuing operations was $1.5 million, compared with pre-tax income from continuing operations of $3.5 million for the prior-year period.
  • Net loss from continuing operations was $(2.7) million, or $(0.22) per diluted share, compared with net income from continuing operations of $1.8 million, or $0.14 per diluted share, for the prior-year period.
  • Adjusted net income from continuing operations (non-GAAP) was $1.0 million, or $0.08 per diluted share(2). Adjusted net income from continuing operations for the prior-year period was $2.0 million, or $0.16 per diluted share(3). (See reconciliation table on page 11.)
  • The company’s financial position reflected total cash and investments of $47.4 million and no outstanding borrowings as of August 2, 2020. This compares with a net cash position of $38.7 million as of the end of the fourth quarter of fiscal 2020. (See summary of cash and investments table on page 7.)
  • Cash flow from operations and free cash flow were $10.6 million and $10.0 million, respectively, compared with cash flow from operations and free cash flow of $2.0 million and $1.0 million, respectively, for the prior-year period. (See reconciliation table on page 9.)
  • The company announced a quarterly cash dividend of 10.5 cents per share, payable in October.
__________________________

(1)

 

During the fourth quarter of fiscal 2020, the company sold its majority ownership interest in eLuxury, LLC, resulting in the elimination of its home accessories segment. Accordingly, the financial results for this segment are excluded from the reported financial performance of the company’s continuing operations and are presented as a discontinued operation in the company’s consolidated financial statements.

 

 

(2)

 

This excludes a $3.7 million net income tax charge, which consists of 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-establishing of certain U.S. Federal net operating loss carryforwards in connection with the U.S. Treasury regulations enacted during the first quarter of fiscal 2021 regarding the Global Intangible Low Taxed Income (“GILTI”) tax provisions of the Tax Cuts and Jobs Act of 2017.

 

 

(3)

This excludes a $229,000 income tax charge, which represents the company’s estimated GILTI tax incurred through the first quarter of fiscal 2020.

Financial Outlook

  • Due to the continued economic impact of the COVID-19 pandemic and the lack of visibility as to its duration, the company is providing only limited financial guidance for fiscal 2021 at this time.
  • Although subject to unforeseen changes that may arise as the pandemic and its economic impact continue to unfold, the company is encouraged by improving business conditions. The company expects sales and operating income for the second quarter of fiscal 2021 to be materially improved as compared to the first quarter, but not reaching the performance achieved in the second quarter of last year, which was an especially strong quarter for the upholstery fabrics segment.

Commenting on the results, Iv Culp, president and chief executive officer of Culp, Inc., said, “As we continue to navigate our way through these uncertain times, we remain focused on the health and safety of our employees, customers, suppliers, and the communities that we serve. I am incredibly thankful for our team’s hard work, agility, and commitment to safety, and I am proud of our leadership team for adapting and effectively managing through this challenging environment.

“We are pleased that both our mattress fabrics and upholstery fabrics segments saw better-than-expected increases in orders and shipments during the quarter, particularly during the last eight weeks. We are especially pleased with the substantial sequential improvement compared with the end of the fourth quarter, going from a significant pre-tax loss to profitability. We believe these trends are primarily being driven by a surge in consumer focus on the home environment and overall comfort, leading to an increased proportion of discretionary spending moving to home furnishings.

“Although the ongoing impact and duration of the COVID-19 pandemic remain unknown, we are cautiously optimistic, based on current demand trends, that business will continue its solid return in the second quarter of fiscal 2021. We are confident that our product-driven strategy, strong management team, and solid financial position will enable us to overcome the near-term headwinds and capture market share as we continue to demonstrate the resilience and strategic advantage of our global platform and stable supply chain. Our balance sheet remains strong, as evidenced by our significantly improved liquidity as compared to pre-pandemic levels at the end of the fiscal 2020 third quarter. We are also pleased to have maintained our quarterly dividend throughout this period of disruption, and we are excited about the continued sequential improvement in our business we expect for the second quarter of fiscal 2021,” added Culp.

Segment Update

Mattress Fabrics Segment

Sales for this segment were $36.1 million for the first quarter, down 7.1 percent compared with sales of $38.9 million in the first quarter of fiscal 2020, which included an extra week. Excluding this extra week, sales for the first quarter of fiscal 2021 were comparable (based on average sales per week) to sales for the first quarter of fiscal 2020.

Sandy Brown, president of Culp’s mattress fabrics division, stated, “While our mattress fabrics sales and operating performance for the first quarter of fiscal 2021 were affected by the ongoing disruption from the COVID-19 pandemic, we were pleased with the solid improvement during the quarter as business conditions began to normalize. The beginning of the quarter was materially affected by the virus, but we experienced a greater than anticipated increase in demand beginning in mid-May as government restrictions were lifted and customers and retail stores resumed operations. This increase continued throughout the quarter across all product offerings, including our CLASS mattress cover business, approximating pre-pandemic levels at quarter end. We returned all our previously furloughed workers and rapidly expanded our production schedules to meet this growing demand. As a result, sales increased by approximately 60 percent from the fourth quarter of fiscal 2020 to the first quarter of fiscal 2021.

“While we were energized by the sequential growth in sales and improving business conditions for the quarter, our operating performance was negatively affected by manufacturing inefficiencies associated with the dramatic ramp up in operations, as well as significant inventory reductions. Despite these challenges, we believe business conditions are stabilizing and will result in improved profitability going forward, barring additional disruption related to the pandemic. To support our future growth plan, we are investing in additional equipment to expand our capacity in North America. We believe the strength and flexibility of our global manufacturing and sourcing operations in the U.S., Canada, Haiti, Asia, and Turkey have us well positioned to execute our strategy and support the current environment surrounding the changing demands of our customers,” added Brown.

Upholstery Fabrics Segment

Sales for this segment were $28.4 million for the first quarter, down 11.0 percent compared with sales of $31.9 million in the first quarter of fiscal 2020, which included an extra week. Excluding this extra week, sales for the first quarter of fiscal 2021 were down approximately 4.0 percent (based on average sales per week) compared with the first quarter of fiscal 2020.

“The unprecedented disruption from the COVID-19 pandemic continued to affect our sales and operating results for the first quarter of fiscal 2021,” said Boyd Chumbley, president of Culp’s upholstery fabrics division. “We began the quarter slowly, with a gradual increase in orders and shipments beginning in mid-May as customers and retail stores started to reopen, followed by a swift upturn during the month of June and further acceleration to end the quarter. We returned all our previously furloughed workers to meet this rapid increase in demand, and our strong platform in Asia, including our cut and sew capabilities in Vietnam and our stable supply chain, has allowed us to respond quickly and meet the needs of our customers.

“We were pleased with the improvement throughout the quarter as demand increased in most of our businesses, including our residential upholstery business which features our popular lines of LiveSmart® and LiveSmart Evolve™ performance fabrics, as well as the Read Window Products portion of our hospitality business. We have benefited from our ability to continue representing our products for customers through our innovative virtual showcase presentations, and our strong product placements with customers prior to the COVID-19 outbreak have also advanced our recovery as business conditions improve,” added Chumbley.

Balance Sheet

“As the ongoing impact of the COVID-19 pandemic remains uncertain, maintaining a strong financial position remains one of Culp’s top priorities for fiscal 2021,” added Ken Bowling, executive vice president and chief financial officer of Culp, Inc. “As of August 2, 2020, we reported $47.4 million in total cash and investments and no outstanding borrowings, up from our $38.7 million net cash position as of the end of the fourth quarter of fiscal 2020. During the first quarter, we incurred $500,000 in capital expenditures and spent $1.3 million on regular dividends. We also generated cash flow from operations of $10.6 million and free cash flow from operations of $10.0 million for the quarter, compared with cash flow from operations of $2.0 million and free cash flow of 1.0 million for the prior-year period. (See reconciliation table on page 9.)

Dividends and Share Repurchases

The company announced that its Board of Directors has approved the payment of the company’s quarterly cash dividend of 10.5 cents per share. The dividend is to be paid on or about October 15, 2020, to shareholders of record as of October 8, 2020. Importantly, the company has maintained and increased its annual dividend for eight consecutive fiscal years. The Board will continue to evaluate the appropriateness of the current dividend rate considering economic conditions and the company’s performance in upcoming quarters.

The company did not repurchase any shares during the first quarter of fiscal 2021, leaving $5.0 million available under the $5.0 million share repurchase program approved by the Board in March 2020. As previously disclosed, the company has temporarily suspended its share repurchases given the economic uncertainty related to COVID-19.

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 operations located in the United States, Canada, China, and Haiti.

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 the company will realize these expectations, meet its 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 and 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 Form 10-K filed with the Securities and Exchange Commission on July 17, 2020, for the fiscal year ended May 3, 2020, and our subsequent periodic 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 (LOSS) INCOME

FOR THREE MONTHS ENDED AUGUST 2, 2020, AND AUGUST 4, 2019

Unaudited

(Amounts in Thousands, Except for Per Share Data)

 

 

 

 

THREE MONTHS ENDED

 

 

 

 

Amount

 

 

 

 

Percent of Sales

 

 

 

 

(4)

 

 

 

(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

August 2,

 

 

 

August 4,

 

 

% Over

 

 

August 2,

 

 

August 4,

 

 

 

 

2020

 

 

 

2019

 

 

(Under)

 

 

2020

 

 

2019

 

Net sales

 

 

$

64,464

 

 

 

 

70,719

 

 

 

(8.8

)%

 

 

100.0

%

 

 

100.0

%

Cost of sales

 

 

 

(54,563

)

 

 

 

(58,307

)

 

 

(6.4

)%

 

 

84.6

%

 

 

82.4

%

Gross profit from continuing operations

 

 

 

9,901

 

 

 

 

12,412

 

 

 

(20.2

)%

 

 

15.4

%

 

 

17.6

%

Selling, general and administrative expenses

 

 

 

(8,018

)

 

 

 

(9,149

)

 

 

(12.4

)%

 

 

12.4

%

 

 

12.9

%

Restructuring credit

 

 

 

 

 

 

 

35

 

 

 

(100.0

)%

 

 

 

 

 

0.0

%

Income from continuing operations

 

 

 

1,883

 

 

 

 

3,298

 

 

 

(42.9

)%

 

 

2.9

%

 

 

4.7

%

Interest expense

 

 

 

(51

)

 

 

 

 

 

 

100.0

%

 

 

0.1

%

 

 

0.0

%

Interest income

 

 

 

58

 

 

 

 

260

 

 

 

(77.7

)%

 

 

0.1

%

 

 

0.4

%

Other expense

 

 

 

(366

)

 

 

 

(95

)

 

 

285.3

%

 

 

0.6

%

 

 

0.1

%

Income before income taxes from continuing operations

 

 

 

1,524

 

 

 

 

3,463

 

 

 

(56.0

)%

 

 

2.4

%

 

 

4.9

%

Income tax expense (1)

 

 

 

(4,324

)

 

 

 

(1,692

)

 

 

155.6

%

 

 

283.7

%

 

 

48.9

%

Income from investment in unconsolidated joint venture

 

 

 

67

 

 

 

 

13

 

 

 

415.4

%

 

 

0.1

%

 

 

0.0

%

Net (loss) income from continuing operations

 

 

 

(2,733

)

 

 

 

1,784

 

 

N.M.

 

 

 

(4.2

)%

 

 

2.5

%

Loss before income taxes from discontinued operation (2)

 

 

 

 

 

 

 

(621

)

 

 

(100.0

)%

 

 

 

 

 

(0.9

)%

Income tax benefit (2) (3)

 

 

 

 

 

 

 

11

 

 

 

(100.0

)%

 

 

 

 

 

1.8

%

Net loss from discontinued operation (2)

 

 

 

 

 

 

 

(610

)

 

 

(100.0

)%

 

 

 

 

 

(0.9

)%

Net (loss) income

 

 

$

(2,733

)

 

 

 

1,174

 

 

N.M.

 

 

 

(4.2

)%

 

 

1.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income from continuing operations per share - basic

 

 

$

(0.22

)

 

 

$

0.14

 

 

N.M.

 

 

 

 

 

 

 

 

 

Net (loss) income from continuing operations per share - diluted

 

 

$

(0.22

)

 

 

$

0.14

 

 

N.M.

 

 

 

 

 

 

 

 

 

Net loss from discontinued operation per share - basic

 

 

$

 

 

 

$

(0.05

)

 

 

(100.0

)%

 

 

 

 

 

 

 

 

Net loss from discontinued operation per share - diluted

 

 

$

 

 

 

$

(0.05

)

 

 

(100.0

)%

 

 

 

 

 

 

 

 

Net (loss) income per share - basic

 

 

$

(0.22

)

 

 

$

0.09

 

 

N.M.

 

 

 

 

 

 

 

 

 

Net (loss) income per share - diluted

 

 

$

(0.22

)

 

 

$

0.09

 

 

N.M.

 

 

 

 

 

 

 

 

 

Average shares outstanding-basic

 

 

 

12,287

 

 

 

 

12,399

 

 

 

(0.9

)%

 

 

 

 

 

 

 

 

Average shares outstanding-diluted

 

 

 

12,287

 

 

 

 

12,410

 

 

 

(1.0

)%

 

 

 

 

 

 

 

 

Notes

(1)

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

 

(2)

Effective March 31, 2020, we sold our entire ownership of eLuxury, LLC to its noncontrolling interest holder, resulting in the elimination of the home accessories segment at such time.

 

(3)

Percent of sales column for income tax benefit is calculated as a % of loss before income taxes from discontinued operations.

 

(4)

See page 11 for our Reconciliation of Selected Income Statement Information to Adjusted Results for the three-month periods ending August 2, 2020 and August 4, 2019, which includes certain adjustments to income tax expense from continuing operations.

 

CULP, INC.

CONSOLIDATED BALANCE SHEETS

AUGUST 2, 2020, AUGUST 4, 2019, AND MAY 3, 2020

Unaudited

(Amounts in Thousands)

 

 

 

Amounts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Condensed)

 

 

(Condensed)

 

 

 

 

 

 

 

 

 

 

(Condensed)

 

 

 

August 2,

 

 

August 4,

 

 

Increase (Decrease)

 

 

* May 3,

 

 

 

2020

 

 

2019

 

 

Dollars

 

 

Percent

 

 

2020

 

Current assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

39,986

 

 

 

44,236

 

 

 

(4,250

)

 

 

(9.6

)%

 

 

69,790

 

Short-term investments - Held-To-Maturity

 

 

5,092

 

 

 

 

 

 

5,092

 

 

 

100.0

%

 

 

4,271

 

Short-term investments - Available for Sale

 

 

983

 

 

 

 

 

 

983

 

 

 

100.0

%

 

 

923

 

Accounts receivable

 

 

29,893

 

 

 

23,661

 

 

 

6,232

 

 

 

26.3

%

 

 

25,093

 

Inventories

 

 

40,402

 

 

 

47,593

 

 

 

(7,191

)

 

 

(15.1

)%

 

 

47,907

 

Current income taxes receivable

 

 

782

 

 

 

776

 

 

 

6

 

 

 

0.8

%

 

 

1,585

 

Current assets - Discontinued operation

 

 

 

 

 

3,557

 

 

 

(3,557

)

 

 

(100.0

)%

 

 

 

Other current assets

 

 

3,547

 

 

 

2,617

 

 

 

930

 

 

 

35.5

%

 

 

2,116

 

Total current assets

 

 

120,685

 

 

 

122,440

 

 

 

(1,755

)

 

 

(1.4

)%

 

 

151,685

 

Property, plant & equipment, net

 

 

42,051

 

 

 

45,475

 

 

 

(3,424

)

 

 

(7.5

)%

 

 

43,147

 

Goodwill

 

 

 

 

 

13,569

 

 

 

(13,569

)

 

 

(100.0

)%

 

 

 

Intangible assets

 

 

3,286

 

 

 

3,805

 

 

 

(519

)

 

 

(13.6

)%

 

 

3,380

 

Long-term investments - Rabbi Trust

 

 

7,916

 

 

 

7,347

 

 

 

569

 

 

 

7.7

%

 

 

7,834

 

Long-term investments - Held-To-Maturity

 

 

1,314

 

 

 

 

 

 

1,314

 

 

 

100.0

%

 

 

2,076

 

Right of use asset

 

 

6,443

 

 

 

5,488

 

 

 

955

 

 

 

17.4

%

 

 

3,903

 

Noncurrent income taxes receivable

 

 

 

 

 

733

 

 

 

(733

)

 

 

(100.0

)%

 

 

 

Deferred income taxes

 

 

593

 

 

 

486

 

 

 

107

 

 

 

22.0

%

 

 

793

 

Investment in unconsolidated joint venture

 

 

1,759

 

 

 

1,520

 

 

 

239

 

 

 

15.7

%

 

 

1,602

 

Long-term note receivable affiliated with discontinued operation

 

 

 

 

 

1,800

 

 

 

(1,800

)

 

 

(100.0

)%

 

 

 

Noncurrent assets - Discontinued operation

 

 

 

 

 

23,058

 

 

 

(23,058

)

 

 

(100.0

)%

 

 

 

Other assets

 

 

540

 

 

 

526

 

 

 

14

 

 

 

2.7

%

 

 

664

 

Total assets

 

$

184,587

 

 

 

226,247

 

 

 

(41,660

)

 

 

(18.4

)%

 

 

215,084

 

Current liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Line of credit - China operations

 

$

 

 

 

 

 

 

 

 

 

 

 

 

1,015

 

Paycheck Protection Program Loan

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7,606

 

Accounts payable - trade

 

 

25,746

 

 

 

21,855

 

 

 

3,891

 

 

 

17.8

%

 

 

23,002

 

Accounts payable - capital expenditures

 

 

333

 

 

 

50

 

 

 

283

 

 

 

566.0

%

 

 

107

 

Operating lease liability - current

 

 

2,387

 

 

 

2,270

 

 

 

117

 

 

 

5.2

%

 

 

1,805

 

Deferred revenue

 

 

685

 

 

 

684

 

 

 

1

 

 

 

0.1

%

 

 

502

 

Accrued expenses

 

 

7,852

 

 

 

8,104

 

 

 

(252

)

 

 

(3.1

)%

 

 

5,687

 

Accrued restructuring costs

 

 

 

 

 

42

 

 

 

(42

)

 

 

(100.0

)%

 

 

 

Current liabilities - Discontinued operation

 

 

 

 

 

1,431

 

 

 

(1,431

)

 

 

(100.0

)%

 

 

 

Income taxes payable - current

 

 

613

 

 

 

1,116

 

 

 

(503

)

 

 

(45.1

)%

 

 

395

 

Total current liabilities

 

 

37,616

 

 

 

35,552

 

 

 

2,064

 

 

 

5.8

%

 

 

40,119

 

Line of credit - U.S. operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

29,750

 

Accrued expenses - long-term

 

 

117

 

 

 

333

 

 

 

(216

)

 

 

(64.9

)%

 

 

167

 

Operating lease liability - long-term

 

 

4,214

 

 

 

3,081

 

 

 

1,133

 

 

 

36.8

%

 

 

2,016

 

Contingent consideration affiliated with discontinued operation

 

 

 

 

 

5,931

 

 

 

(5,931

)

 

 

(100.0

)%

 

 

 

Income taxes payable - long-term

 

 

3,591

 

 

 

3,640

 

 

 

(49

)

 

 

(1.3

)%

 

 

3,796

 

Deferred income taxes

 

 

5,311

 

 

 

2,543

 

 

 

2,768

 

 

 

108.8

%

 

 

1,818

 

Deferred compensation

 

 

7,869

 

 

 

7,232

 

 

 

637

 

 

 

8.8

%

 

 

7,720

 

Noncurrent liabilities - Discontinued operation

 

 

 

 

 

3,599

 

 

 

(3,599

)

 

 

(100.0

)%

 

 

 

Total liabilities

 

 

58,718

 

 

 

61,911

 

 

 

(3,193

)

 

 

(5.2

)%

 

 

85,386

 

Shareholders' equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders' equity attributable to Culp Inc.

 

 

125,869

 

 

 

160,146

 

 

 

(34,277

)

 

 

(21.4

)%

 

 

129,698

 

Non-controlling interest - Discontinued Operation

 

 

-

 

 

 

4,190

 

 

 

(4,190

)

 

 

(100.0

)%

 

 

 

 

 

 

125,869

 

 

 

164,336

 

 

 

(38,467

)

 

 

(23.4

)%

 

 

129,698

 

Total liabilities and shareholders' equity

 

$

184,587

 

 

 

226,247

 

 

 

(41,660

)

 

 

(18.4

)%

 

 

215,084

 

Shares outstanding

 

 

12,292

 

 

 

12,405

 

 

 

(113

)

 

 

(0.9

)%

 

 

12,285

 

* Derived from audited financial statements.

 

CULP, INC.

SUMMARY OF CASH, INVESTMENTS, AND DEBT

AUGUST 2, 2020, AUGUST 4, 2019, AND MAY 3, 2020

Unaudited

(Amounts in Thousands)

 

 

 

Amounts

 

 

 

 

 

 

 

August 2,

 

 

 

August 4,

 

 

May 3,

 

 

 

2020

 

 

 

2019

 

 

2020*

 

Cash and Investments

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

39,986

 

 

 

$

44,236

 

 

$

69,790

 

Short-term investments - Available for Sale

 

 

983

 

 

 

 

 

 

 

923

 

Short-term investments - Held-To-Maturity

 

 

5,092

 

 

 

 

 

 

 

4,271

 

Long-term investments - Held-To-Maturity

 

 

1,314

 

 

 

 

 

 

 

2,076

 

Total Cash and Investments

 

$

47,375

 

 

 

$

44,236

 

 

$

77,060

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt

 

 

 

 

 

 

 

 

 

 

 

 

 

Line of credit - China operations

 

$

 

 

 

$

 

 

$

1,015

 

Paycheck Protection Program Loan

 

 

 

 

 

 

 

 

 

7,606

 

Line of credit - U.S. operations

 

 

 

 

 

 

 

 

 

29,750

 

Total debt

 

$

 

 

 

$

 

 

$

38,371

 

Net Cash Position

 

$

47,375

 

 

 

$

44,236

 

 

$

38,689

 

* Derived from audited financial statements.

 

CULP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED AUGUST 2, 2020, AND AUGUST 4, 2019

Unaudited

(Amounts in Thousands)

 

 

 

THREE MONTHS ENDED

 

 

 

Amounts

 

 

 

August 2,

 

 

August 4,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(2,733

)

 

$

1,174

 

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation

 

 

1,822

 

 

 

1,905

 

Amortization

 

 

118

 

 

 

176

 

Stock-based compensation

 

 

126

 

 

 

154

 

Deferred income taxes

 

 

3,693

 

 

 

(662

)

Gain on sale of property, plant, and equipment

 

 

 

 

 

(17

)

Income from investment in unconsolidated joint venture

 

 

(67

)

 

 

(13

)

Foreign currency exchange loss (gain)

 

 

154

 

 

 

(47

)

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(4,757

)

 

 

(375

)

Inventories

 

 

7,592

 

 

 

(25

)

Other current assets

 

 

(1,254

)

 

 

161

 

Other assets

 

 

(24

)

 

 

111

 

Accounts payable

 

 

2,544

 

 

 

(1,468

)

Deferred revenue

 

 

183

 

 

 

285

 

Accrued expenses and deferred compensation

 

 

2,377

 

 

 

222

 

Accrued restructuring costs

 

 

 

 

 

(82

)

Income taxes

 

 

807

 

 

 

524

 

Net cash provided by operating activities

 

 

10,581

 

 

 

2,023

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(500

)

 

 

(935

)

Proceeds from the sale of property, plant, and equipment

 

 

 

 

 

209

 

Investment in unconsolidated joint venture

 

 

(90

)

 

 

 

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

 

 

350

 

 

 

5,000

 

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

 

 

(423

)

 

 

 

Purchase of short-term investments (Available for Sale)

 

 

(34

)

 

 

 

Proceeds from the sale of long-term investments (Rabbi Trust)

 

 

39

 

 

 

 

Purchase of long-term investments (Rabbi Trust)

 

 

(78

)

 

 

(259

)

Net cash (used in) provided by investing activities

 

 

(736

)

 

 

4,015

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Payments associated with lines of credit

 

 

(30,772

)

 

 

 

Payments associated with Paycheck Protection Program Loan

 

 

(7,606

)

 

 

 

Proceeds from subordinated loan payable associated with the noncontrolling interest of discontinued operation

 

 

 

 

 

250

 

Cash paid for acquisition of business

 

 

 

 

 

(763

)

Dividends paid

 

 

(1,291

)

 

 

(1,241

)

Common stock surrendered for withholding taxes payable

 

 

 

 

 

(44

)

Capital contribution associated with the noncontrolling interest of discontinued operation

 

 

 

 

 

40

 

Payments of debt issuance costs

 

 

(15

)

 

 

 

Net cash used in financing activities

 

 

(39,684

)

 

 

(1,758

)

Effect of exchange rate changes on cash and cash equivalents

 

 

35

 

 

 

(52

)

(Decrease) increase in cash and cash equivalents

 

 

(29,804

)

 

 

4,228

 

Cash and cash equivalents at beginning of year

 

 

69,790

 

 

 

40,008

 

Cash and cash equivalents at end of period

 

$

39,986

 

 

$

44,236

 

Free Cash Flow (1)

 

$

9,987

 

 

$

986

 

 

CULP, INC.

RECONCILIATION OF FREE CASH FLOW

FOR THE THREE MONTHS ENDED AUGUST 2, 2020, AND AUGUST 4, 2019

Unaudited

(Amounts in thousands)

 

(1) Free Cash Flow reconciliation is as follows:

 

 

 

 

 

 

 

 

 

 

 

FY 2021

 

 

FY 2020

 

A) Net cash provided by operating activities

 

$

10,581

 

 

 

2,023

 

B) Minus: Capital Expenditures

 

 

(500

)

 

 

(935

)

C) Plus: Proceeds from the sale of property, plant, and equipment

 

 

 

 

 

209

 

D) Minus: Investment in unconsolidated joint venture

 

 

(90

)

 

 

 

E) Plus: Proceeds from the sale of long-term investments (Rabbi Trust)

 

 

39

 

 

 

 

F) Minus: Purchase of long-term investments (Rabbi Trust)

 

 

(78

)

 

 

(259

)

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

 

 

35

 

 

 

(52

)

Free Cash Flow

 

$

9,987

 

 

 

986

 

 

 

 

 

 

 

 

 

 

 
 

CULP, INC.

STATEMENTS OF OPERATIONS BY SEGMENT

FOR THE THREE MONTHS ENDED AUGUST 2, 2020, AND AUGUST 4, 2019

Unaudited

(Amounts in thousands)

 

 

 

 

 

THREE MONTHS ENDED

 

 

 

 

 

Amounts

 

 

 

 

 

 

Percent of Total Sales

 

 

 

 

 

August 2,

 

 

 

August 4,

 

 

% Over

 

 

August 2,

 

 

August 4,

 

Net Sales by Segment

 

 

 

2020

 

 

 

2019

 

 

(Under)

 

 

2020

 

 

2019

 

Mattress Fabrics

 

 

 

$

36,103

 

 

 

 

38,859

 

 

 

(7.1

)%

 

 

56.0

%

 

 

54.9

%

Upholstery Fabrics

 

 

 

 

28,361

 

 

 

 

31,860

 

 

 

(11.0

)%

 

 

44.0

%

 

 

45.1

%

Net Sales

 

 

 

$

64,464

 

 

 

 

70,719

 

 

 

(8.8

)%

 

 

100.0

%

 

 

100.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit from Continuing

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operations by Segment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit Margin

 

Mattress Fabrics

 

 

 

$

4,608

 

 

 

 

5,691

 

 

 

(19.0

)%

 

 

12.8

%

 

 

14.6

%

Upholstery Fabrics

 

 

 

 

5,293

 

 

 

 

6,721

 

 

 

(21.2

)%

 

 

18.7

%

 

 

21.1

%

Gross Profit From Continuing Operations

 

 

 

$

9,901

 

 

 

 

12,412

 

 

 

(20.2

)%

 

 

15.4

%

 

 

17.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, General and Administrative Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

by segment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Percent of Sales

 

Mattress Fabrics

 

 

 

$

2,763

 

 

 

 

3,071

 

 

 

(10.0

)%

 

 

7.7

%

 

 

7.9

%

Upholstery Fabrics

 

 

 

 

3,180

 

 

 

 

3,846

 

 

 

(17.3

)%

 

 

11.2

%

 

 

12.1

%

Unallocated Corporate expenses

 

 

 

 

2,075

 

 

 

 

2,232

 

 

 

(7.0

)%

 

 

3.2

%

 

 

3.2

%

Selling, General and Administrative Expenses

 

 

 

$

8,018

 

 

 

 

9,149

 

 

 

(12.4

)%

 

 

12.4

%

 

 

12.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from Continuing Operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income

 

by Segment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Margin

 

Mattress Fabrics

 

 

 

$

1,845

 

 

 

 

2,620

 

 

 

(29.6

)%

 

 

5.1

%

 

 

6.7

%

Upholstery Fabrics

 

 

 

 

2,113

 

 

 

 

2,875

 

 

 

(26.5

)%

 

 

7.5

%

 

 

9.0

%

Unallocated corporate expenses

 

 

 

 

(2,075

)

 

 

 

(2,232

)

 

 

(7.0

)%

 

 

(3.2

)%

 

 

(3.2

)%

Subtotal

 

 

 

 

1,883

 

 

 

 

3,263

 

 

 

 

 

 

 

 

 

 

 

 

 

Restructuring credit

 

 

 

 

 

 

 

 

35

 

 

 

(100.0

)%

 

 

0.0

%

 

 

0.0

%

Income From Continuing Operations

 

 

 

$

1,883

 

 

 

 

3,298

 

 

 

(42.9

)%

 

 

2.9

%

 

 

4.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation Expense by Segment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mattress Fabrics

 

 

 

$

1,631

 

 

 

 

1,620

 

 

 

0.7

%

 

 

 

 

 

 

 

 

Upholstery Fabrics

 

 

 

 

191

 

 

 

 

190

 

 

 

0.5

%

 

 

 

 

 

 

 

 

Discontinued Operation

 

 

 

 

-

 

 

 

 

95

 

 

 

(100.0

)%

 

 

 

 

 

 

 

 

Depreciation Expense

 

 

 

$

1,822

 

 

 

 

1,905

 

 

 

(4.4

)%

 

 

 

 

 

 

 

 

 

CULP, INC.

RECONCILIATION OF SELECTED INCOME STATEMENT INFORMATION TO ADJUSTED RESULTS

FOR THE THREE MONTHS ENDED AUGUST 2, 2020, AND AUGUST 4, 2019

 

 

 

THREE MONTHS ENDED (UNAUDITED)

 

 

 

As

 

 

 

 

 

 

August 2,

 

 

As

 

 

 

 

 

 

August 4,

 

 

 

Reported

 

 

 

 

 

 

2020

 

 

Reported

 

 

 

 

 

 

2019

 

 

 

August 2,

 

 

 

 

 

 

Adjusted

 

 

August 4,

 

 

 

 

 

 

Adjusted

 

 

 

2020

 

 

Adjustments

 

 

Results

 

 

2019

 

 

Adjustments

 

 

Results

 

Income before income taxes from continuing operations

$

 

1,524

 

 

 

 

 

 

1,524

 

$

 

3,463

 

 

 

 

 

 

3,463

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense (1) (2)

 

 

(4,324

)

 

 

3,691

 

 

 

(633

)

 

 

(1,692

)

 

 

229

 

 

 

(1,463

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from investment in unconsolidated joint venture

 

67

 

 

 

 

 

 

67

 

 

13

 

 

 

 

 

 

13

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) income from continuing operations

$

 

(2,733

)

 

 

3,691

 

 

 

958

 

$

 

1,784

 

 

 

229

 

 

 

2,013

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income from continuing operations per share - basic

 

$

(0.22

)

 

 

 

 

 

$

0.08

 

 

$

0.14

 

 

 

 

 

 

$

0.16

 

Net (loss) income from continuing operations per share - diluted

 

$

(0.22

)

 

 

 

 

 

$

0.08

 

 

$

0.14

 

 

 

 

 

 

$

0.16

 

Average shares outstanding-basic

 

 

12,287

 

 

 

 

 

 

 

12,287

 

 

 

12,399

 

 

 

 

 

 

 

12,399

 

Average shares outstanding-diluted

 

 

12,287

 

 

 

 

 

 

 

12,294

 

 

 

12,410

 

 

 

 

 

 

 

12,410

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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 regarding Global Intangible Low Taxed Income (“GILTI”) tax provisions of the Tax Cuts and Jobs Act of 2017.

 

 

(2)

The $229,000 adjustment represents our estimated GILTI tax incurred through our first quarter of fiscal 2020.

 

CULP, INC.

CONSOLIDATED STATEMENTS OF ADJUSTED EBITDA

FOR THE TWELVE MONTHS ENDED AUGUST 2, 2020, AND AUGUST 4, 2019

Unaudited

(Amounts in Thousands)

 

 

 

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 operations

 

 

441

 

 

 

7,824

 

 

 

8,698

 

 

 

-

 

 

 

16,963

 

Income tax expense (benefit) from continuing operations

 

 

1,930

 

 

 

(973

)

 

 

704

 

 

 

4,324

 

 

 

5,985

 

Interest income, net

 

 

(237

)

 

 

(258

)

 

 

(37

)

 

 

(7

)

 

 

(539

)

Asset impairments from continuing operations

 

 

 

 

 

 

 

 

13,712

 

 

 

 

 

 

13,712

 

Restructuring credit and related charges

 

 

 

 

 

(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

 

$

6,634

 

 

$

4,708

 

 

$

(2,948

)

 

$

3,650

 

 

$

12,044

 

% Net Sales

 

 

9.5

%

 

 

6.9

%

 

 

(6.2

)%

 

 

5.7

%

 

 

4.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter

Ended

 

 

Quarter

Ended

 

 

Quarter

Ended

 

 

Quarter

Ended

 

 

Trailing

12 Months

 

 

 

October 28,

 

 

January 27

 

 

April 28,

 

 

August 4,

 

 

August 4,

 

 

 

2018

 

 

2019

 

 

2019

 

 

2019

 

 

2019

 

Net income (loss)

 

$

2,944

 

 

$

3,060

 

 

$

(1,511

)

 

$

1,174

 

 

$

5,667

 

(Income) loss before income taxes from discontinued operations

 

 

(37

)

 

 

313

 

 

 

477

 

 

 

621

 

 

 

1,374

 

Income tax expense from continuing operations

 

 

1,270

 

 

 

1,274

 

 

 

3,091

 

 

 

1,692

 

 

 

7,327

 

Interest income, net

 

 

(141

)

 

 

(259

)

 

 

(221

)

 

 

(260

)

 

 

(881

)

Restructuring credit and related charges

 

 

(791

)

 

 

340

 

 

 

 

 

 

(35

)

 

 

(486

)

Other non-recurring charges

 

 

249

 

 

 

429

 

 

 

500

 

 

 

 

 

 

1,178

 

Depreciation expense - continuing operations

 

 

1,949

 

 

 

1,934

 

 

 

1,933

 

 

 

1,810

 

 

 

7,626

 

Amortization expense - continuing operations

 

 

140

 

 

 

126

 

 

 

113

 

 

 

101

 

 

 

480

 

Stock based compensation

 

 

395

 

 

 

479

 

 

 

(243

)

 

 

154

 

 

 

785

 

Adjusted EBITDA

 

$

5,978

 

 

$

7,696

 

 

$

4,139

 

 

$

5,257

 

 

$

23,070

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

% Net Sales

 

 

8.3

%

 

 

10.5

%

 

 

6.2

%

 

 

7.4

%

 

 

8.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

% Over (Under)

 

 

11.0

%

 

 

(38.8

)%

 

 

(171.2

)%

 

 

(30.6

)%

 

 

(47.8

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

$Cashtags

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