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    CULP   US2302151053

CULP, INC.

(CULP)
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Culp Announces Results for Second Quarter Fiscal 2022

12/01/2021 | 04:16pm EST

Board of Directors Authorizes Five Percent Increase in Quarterly Cash Dividend

Culp, Inc. (NYSE: CULP) (together with its consolidated subsidiaries, “CULP”) today reported financial and operating results for the second quarter ended October 31, 2021.

Fiscal 2022 Second Quarter Financial Summary

  • Net sales were $74.6 million, down 3.0 percent over the prior-year period, with mattress fabrics sales up 2.1 percent and upholstery fabrics sales down 8.5 percent compared with the second quarter of last year.
  • Income from operations (operating income) was $1.6 million, compared with income from operations of $4.5 million for the prior-year period.
  • Net income was $851,000, or $0.07 per diluted share, compared with net income of $2.4 million, or $0.19 per diluted share, for the prior-year period.
  • The company’s financial position reflected total cash and investments of $36.6 million and no outstanding borrowings as of October 31, 2021. (See summary of cash and investments table at the back of this press release.)
  • The company announced a five percent increase in its quarterly cash dividend to 11.5 cents per share, commencing in the third quarter of fiscal 2022. At an annual indicated dividend of 46 cents per share, the yield is 4.34 percent, based upon yesterday’s closing stock price of $10.61 per share. Notably, this is the company’s ninth straight year of increasing its annual dividend.
  • The company repurchased 73,002 shares of CULP common stock during the second quarter of fiscal 2022, leaving approximately $3.2 million available under the company’s share repurchase program.

Financial Outlook

  • The company continues to navigate uncertainty in the macroeconomic environment related to customer supply chain disruption for non-fabric components, significant inflationary pressures, a challenging labor market, and fluctuation in foreign currency exchange rates. Although CULP is well positioned over the long term with its product-driven strategy and flexible global platform, the current headwinds are expected to continue pressuring results throughout the second half of fiscal 2022, especially during the third quarter. The third and fourth quarters will also be affected by the timing of the Chinese New Year holiday, which begins at the end of the third quarter and continues into the beginning of the fourth quarter.
  • Due to the uncertain and rapidly changing inflationary environment, the lack of visibility relating to the duration and magnitude of customer supply chain disruptions, and uncertainty relating to the impact of the new Omicron variant of the coronavirus, the company is withdrawing its previously issued annual guidance for fiscal 2022 and is only providing a limited outlook for the third and fourth quarters until the current volatility stabilizes.
  • The company’s net sales and consolidated operating income (income from operations) for the third quarter of fiscal 2022 are expected to be sequentially comparable to the second quarter of fiscal 2022. The company expects a strong improvement in net sales and operating income for the fourth quarter of fiscal 2022, as compared to both the third quarter of fiscal 2022 and the fourth quarter of fiscal 2021.
  • The company’s expectations for the third and fourth quarters of fiscal 2022 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 and the projected impact of the ongoing headwinds. The outlook assumes there will be no further pandemic-related shutdowns or material disruption, including because of the new Omicron variant, and further assumes 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, “As previously announced, our results for the second quarter reflected lower than expected sales, primarily for our upholstery fabrics segment. Several external factors affected our sales results for the quarter, particularly COVID-related shutdowns in Vietnam and customer supply chain constraints for non-fabric components, while profitability remained pressured in both of our businesses by the continued rapid rise in freight, raw material, and labor costs.

“Despite the challenging macroeconomic environment, I am extremely proud of how our global platform and our associates have responded over the last 18 months to build a more robust supply chain that has kept pace with demand and met the delivery needs of our valued customers. Looking ahead, we are pleased that the shutdowns in Vietnam have been lifted, but the rapidly rising costs and the disruption throughout the industry’s supply chains continue, and many of our customers have delayed their previously planned rollouts and new product launches. We also believe that many customers have excess inventory for fabric and cover products that were purchased to support their expanding backlogs as they wait for their supply chain issues to subside. As a result, we expect it could take some time for customers to work through their existing fabric and cover inventory levels. Additionally, we have some concern that inflationary pressures are causing some slowing in new business, leading to lower demand once customers fulfill their existing backlogs. Based on these factors, we expect that current headwinds will continue to pressure results during the second half of fiscal 2022, especially during the third quarter, but we expect to see a meaningful rebound in our business beginning in the fourth quarter and continuing into fiscal 2023.

“As market conditions evolve, CULP is well positioned for the long term, and we are confident in our ability to improve our market reach. Notably, if we meet our expectations for the third and fourth quarters, then for the full fiscal 2022 year, we will sustain the significant sales gains we have achieved as compared to pre-COVID sales levels of fiscal 2020. We are implementing further pricing actions during the third quarter to help offset current inflationary pressures. We also expect to open our new Haiti facility during the third quarter, which will increase our capacity for cut and sewn upholstery kits. Our strong global platform, together with our long-term supplier relationships, continues to provide a distinct competitive advantage, allowing us to quickly respond to the evolving needs of our customers. We also remain focused on innovation and creative designs in both of our businesses, and we are confident in our product-driven strategy. The recent opening of our new innovation campus in downtown High Point, North Carolina, has been extremely well received by our customers, providing them with a hands-on, first-class experience for viewing the scope of our products, from fabric to sewn cover.

“Importantly, we have the financial strength to support our business in the current environment, and we look forward to the opportunities to deliver value for our customers, employees, and shareholders in fiscal 2022 and beyond,” added Culp.

Segment Update

Mattress Fabrics Segment

Sales for this segment were $40.9 million for the second quarter, up 2.1 percent compared with sales of $40.0 million in the second quarter of fiscal 2021.

“While mattress fabrics sales for the second quarter were in line with our expectations, revenue was affected somewhat by our customers’ supply chain constraints for non-fabric components and existing inventory levels for mattress fabrics and covers,” said Sandy Brown, president of the company’s mattress fabrics division. “This caused our customers to temporarily delay taking some orders and push some new product launches into subsequent quarters while working through these limitations. However, we expect these pressures will be alleviated over the medium term.

“Our operating performance for the second quarter of fiscal 2022, was negatively affected by higher freight, raw material, and labor costs; inefficiencies due to ongoing labor shortages in the U.S. and Canada; unfavorable foreign currency fluctuations in China and Canada; and product mix. The price increase and freight surcharge implemented during the first half of fiscal 2022 have helped us offset a portion of the current inflationary pressures we are facing. However, the lag in price realization, as well as some competitive market pressures that limit us from immediately passing on all of our cost increases, are expected to continue affecting our operating performance in the near term, and we may need to consider further pricing actions if operating costs continue to rise.

“Despite the challenging environment during the second quarter, we relied on our proven product-driven strategy with a relentless focus on design creativity and innovation, supported by the utilization of our resilient manufacturing and sourcing platform to service the needs of our customers. Our on-shore, near-shore, and off-shore supply chain strategy, as well as our fabric-to-cover model, remains a preferred platform for our sewn mattress cover customers.

“Looking ahead, our market position remains solid, with strong new placements and product developments for fiscal 2023. Rising costs continue to pressure our profitability, but our team remains committed to ongoing efforts to control internal costs, improve efficiencies, and take reasonable pricing actions to mitigate and manage inflation. Over the long term, we are well positioned to sustain our competitive advantage and leverage our compelling business model to further expand our market reach, especially as our customers’ supply chain disruption and inventory positions begin to normalize,” added Brown.

Upholstery Fabrics Segment

Sales for this segment were $33.7 million for the second quarter, down 8.5 percent compared with sales of $36.8 million in the second quarter of fiscal 2021.

“Our second quarter results were disappointing, largely driven by lower sales in our residential business due to COVID-19-related shutdowns of our sourcing partners and customers in Vietnam throughout most of the quarter,” said Boyd Chumbley, president of the company’s upholstery fabrics division. “These shutdowns were expected to be short term, but instead lasted significantly longer than anticipated and limited our ability to ship orders both within and outside of Asia. Residential sales were also pressured by our customers’ supply chain constraints and labor shortages at their U.S. facilities, which significantly reduced our ability to ship prepared fabric orders.

“Our operating performance for the second quarter of fiscal 2022 was primarily affected by the lower sales in our residential business, as well as higher freight and raw material costs, start-up costs for our new Haiti facility, unfavorable foreign currency fluctuations in China, and lower contribution from our Read Window Products business. We implemented a freight surcharge during the second quarter to help offset rising freight costs, but due to the continued rapid increase in operating costs and raw material costs, we are instituting an additional price increase during the third quarter to help cover a portion of these inflationary pressures.

“Despite the headwinds in our residential business, we were encouraged by the recovery in our hospitality business during the second quarter, led by our hospitality/contract fabric business. We also saw a measurable improvement in our Read Window Products business during the last month of the quarter. We are pleased the shutdowns that affected our Vietnam customers and sourcing partners during the quarter have now been lifted, and we have resumed shipping at normalized capacity. Additionally, we expect to begin production at our new facility in Haiti during the third quarter, which will expand our capacity for cut and sewn upholstery kits and mitigate some risk with near-shore capabilities that complement our strong Asian platform.

“Looking ahead, there are lingering near-term challenges related to our customers’ supply chain constraints and existing levels of fabric inventory for our residential business. Also, while we believe demand trends remain favorable for the home furnishings industry, there is an expected slowdown in new business from the peak experienced during the post-COVID stay-at-home surge. Despite these external conditions, our business is well positioned for the long term with our product-driven strategy and innovative product offerings, including our popular portfolio of LiveSmart® performance products, as well as our flexible Asian platform, our long-term supplier relationships, and our expanded capacity in Haiti. We are also encouraged by the recent Showtime fabric market, where our products received favorable reaction and strong support from customers. Above all, we remain focused on meeting the changing needs of our valued customers,” added Chumbley.

Balance Sheet

“Maintaining a strong financial position during these uncertain times continues to be one of the company’s top priorities,” added Ken Bowling, executive vice president and chief financial officer of Culp, Inc. “As of October 31, 2021, we reported $36.6 million in total cash and investments and no outstanding debt, compared with $46.9 million in total cash and investments and no outstanding debt as of the end of fiscal 2021. Our cash flow from operations and free cash flow was $(1.3) million and $(5.8) million, respectively, for the first six months of fiscal 2022. (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 half of this fiscal year were affected by the following uses of cash: (i) increased inventory purchases to support our valued customers, to get ahead of rising raw material costs, and to strategically improve our in-stock position ahead of the Chinese New Year holiday; (ii) $3.9 million investment in capital expenditures, including expenditures for machinery, equipment, and IT investments, as well as expenditures related to our new innovation campus; (iii) $1.4 million in payments for the new building lease and startup expenses associated with our Haiti upholstery cut and sew operation; and (iv) increased accounts payable payments related to our return to normal credit terms as opposed to the extended terms previously granted in response to the COVID-19 pandemic. Additionally, during the first six months of fiscal 2022, we paid $2.7 million in regular quarterly dividends and spent $1.8 million on share repurchases,” added Bowling.

Dividends and Share Repurchases

The company announced that its Board of Directors has approved a five percent increase in the company’s quarterly cash dividend to 11.5 cents per share, marking the ninth straight year of increasing the annual dividend. At an annual indicated dividend of 46 cents per share, the yield is 4.34 percent, based upon yesterday’s closing stock price of $10.61 per share. The next quarterly payment will be made on January 19, 2022, to shareholders of record as of January 11, 2022.

During the second quarter of fiscal 2022, the company repurchased 73,002 shares of CULP common stock in the open market under its existing share repurchase authorization, leaving approximately $3.2 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 second quarter of fiscal 2022 on December 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 December 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. Increases in freight costs, labor costs, and raw material prices, including increases in market prices for petrochemical products, can also significantly affect the prices we pay for shipping, labor, and raw materials, respectively, and in turn, increase our operating costs and decrease our profitability. Finally, disruption in our customers’ supply chains for non-fabric components may cause declines in new orders and/or delayed shipping of existing orders while our customers wait for other components, which could adversely affect our financial results. 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

FOR THREE MONTHS ENDED OCTOBER 31, 2021, AND NOVEMBER 1, 2020

Unaudited

(Amounts in Thousands, Except for Per Share Data)

 

 

 

THREE MONTHS ENDED

 

 

 

Amount

 

 

 

 

 

 

Percent of Sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

October 31,

 

 

November 1,

 

 

% Over

 

 

October 31,

 

 

November 1,

 

 

 

2021

 

 

2020

 

 

(Under)

 

 

2021

 

 

2020

 

Net sales

 

$

74,561

 

 

 

76,851

 

 

 

(3.0

)%

 

 

100.0

%

 

 

100.0

%

Cost of sales

 

 

(63,834

)

 

 

(62,590

)

 

 

2.0

%

 

 

85.6

%

 

 

81.4

%

Gross profit

 

 

10,727

 

 

 

14,261

 

 

 

(24.8

)%

 

 

14.4

%

 

 

18.6

%

Selling, general and administrative

expenses

 

 

(9,087

)

 

 

(9,743

)

 

 

(6.7

)%

 

 

12.2

%

 

 

12.7

%

Income from operations

 

 

1,640

 

 

 

4,518

 

 

 

(63.7

)%

 

 

2.2

%

 

 

5.9

%

Interest income

 

 

59

 

 

 

59

 

 

 

 

 

 

0.1

%

 

 

0.1

%

Other expense

 

 

(404

)

 

 

(680

)

 

 

(40.6

)%

 

 

0.5

%

 

 

0.9

%

Income before income taxes

 

 

1,295

 

 

 

3,897

 

 

 

(66.8

)%

 

 

1.7

%

 

 

5.1

%

Income tax expense (1)

 

 

(444

)

 

 

(1,613

)

 

 

(72.5

)%

 

 

34.3

%

 

 

41.4

%

Income from investment in

unconsolidated joint venture

 

 

 

 

 

100

 

 

 

(100.0

)%

 

 

0.0

%

 

 

0.1

%

Net income

 

 

851

 

 

 

2,384

 

 

 

(64.3

)%

 

 

1.1

%

 

 

3.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share - basic

 

$

0.07

 

 

$

0.19

 

 

 

(64.1

)%

 

 

 

 

 

 

 

 

Net income per share - diluted

 

$

0.07

 

 

$

0.19

 

 

 

(64.3

)%

 

 

 

 

 

 

 

 

Average shares outstanding-basic

 

 

12,223

 

 

 

12,298

 

 

 

(0.6

)%

 

 

 

 

 

 

 

 

Average shares outstanding-diluted

 

 

12,316

 

 

 

12,324

 

 

 

(0.1

)%

 

 

 

 

 

 

 

 

Notes

 

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

CULP, INC.

CONSOLIDATED STATEMENTS OF NET INCOME (LOSS)

FOR SIX MONTHS ENDED OCTOBER 31, 2021, AND NOVEMBER 1, 2020

Unaudited

(Amounts in Thousands, Except for Per Share Data)

 

 

 

SIX MONTHS ENDED

 

 

 

Amount

 

 

 

 

 

 

Percent of Sales

 

 

 

 

 

 

 

(2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

October 31,

 

 

November 1,

 

 

% Over

 

 

October 31,

 

 

November 1,

 

 

 

2021

 

 

2020

 

 

(Under)

 

 

2021

 

 

2020

 

Net sales

 

$

157,608

 

 

 

141,315

 

 

 

11.5

%

 

 

100.0

%

 

 

100.0

%

Cost of sales

 

 

(134,382

)

 

 

(117,153

)

 

 

14.7

%

 

 

85.3

%

 

 

82.9

%

Gross profit

 

 

23,226

 

 

 

24,162

 

 

 

(3.9

)%

 

 

14.7

%

 

 

17.1

%

Selling, general and administrative

expenses

 

 

(18,268

)

 

 

(17,761

)

 

 

2.9

%

 

 

11.6

%

 

 

12.6

%

Income from operations

 

 

4,958

 

 

 

6,401

 

 

 

(22.5

)%

 

 

3.1

%

 

 

4.5

%

Interest expense

 

 

 

 

 

(51

)

 

 

(100.0

)%

 

 

0.0

%

 

 

0.0

%

Interest income

 

 

132

 

 

 

117

 

 

 

12.8

%

 

 

0.1

%

 

 

0.1

%

Other expense

 

 

(640

)

 

 

(1,046

)

 

 

(38.8

)%

 

 

0.4

%

 

 

0.7

%

Income before income taxes

 

 

4,450

 

 

 

5,421

 

 

 

(17.9

)%

 

 

2.8

%

 

 

3.8

%

Income tax expense (1)

 

 

(1,349

)

 

 

(5,937

)

 

 

(77.3

)%

 

 

30.3

%

 

 

109.5

%

Income from investment in

unconsolidated joint venture

 

 

 

 

 

167

 

 

 

(100.0

)%

 

 

0.0

%

 

 

0.1

%

Net income (loss)

 

 

3,101

 

 

 

(349

)

 

N.M.

 

 

 

2.0

%

 

 

(0.2

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share - basic

 

$

0.25

 

 

$

(0.03

)

 

N.M

 

 

 

 

 

 

 

 

 

Net income (loss) per share - diluted

 

$

0.25

 

 

$

(0.03

)

 

N.M

 

 

 

 

 

 

 

 

 

Average shares outstanding-basic

 

 

12,268

 

 

 

12,293

 

 

 

(0.2

)%

 

 

 

 

 

 

 

 

Average shares outstanding-diluted

 

 

12,369

 

 

 

12,293

 

 

 

0.6

%

 

 

 

 

 

 

 

 

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 six-month period ending November 1, 2020, which includes certain adjustments to income tax expense.

CULP, INC.

CONSOLIDATED BALANCE SHEETS

OCTOBER 31, 2021, NOVEMBER 1, 2020, AND MAY 2, 2021

Unaudited

(Amounts in Thousands)

 

 

 

Amounts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Condensed)

 

 

(Condensed)

 

 

 

 

 

 

 

 

 

 

(Condensed)

 

 

 

October 31,

 

 

November 1,

 

 

Increase (Decrease)

 

 

* May 2,

 

 

 

2021

 

 

2020

 

 

Dollars

 

 

Percent

 

 

2021

 

Current assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

16,956

 

 

 

45,288

 

 

 

(28,332

)

 

 

(62.6

)%

 

 

37,009

 

Short-term investments - Held-To-Maturity

 

 

1,564

 

 

 

5,005

 

 

 

(3,441

)

 

 

(68.8

)%

 

 

3,161

 

Short-term investments - Available for Sale

 

 

9,709

 

 

 

5,462

 

 

 

4,247

 

 

 

77.8

%

 

 

5,542

 

Accounts receivable

 

 

32,316

 

 

 

32,960

 

 

 

(644

)

 

 

(2.0

)%

 

 

37,726

 

Inventories

 

 

63,781

 

 

 

47,726

 

 

 

16,055

 

 

 

33.6

%

 

 

55,917

 

Current income taxes receivable

 

 

613

 

 

 

 

 

 

613

 

 

 

100.0

%

 

 

 

Other current assets

 

 

3,811

 

 

 

3,509

 

 

 

302

 

 

 

8.6

%

 

 

3,852

 

Total current assets

 

 

128,750

 

 

 

139,950

 

 

 

(11,200

)

 

 

(8.0

)%

 

 

143,207

 

Property, plant & equipment, net

 

 

43,265

 

 

 

41,599

 

 

 

1,666

 

 

 

4.0

%

 

 

44,003

 

Right of use assets

 

 

13,649

 

 

 

6,165

 

 

 

7,484

 

 

 

121.4

%

 

 

11,730

 

Intangible assets

 

 

2,816

 

 

 

3,192

 

 

 

(376

)

 

 

(11.8

)%

 

 

3,004

 

Long-term investments - Rabbi Trust

 

 

9,036

 

 

 

8,060

 

 

 

976

 

 

 

12.1

%

 

 

8,415

 

Long-term investments - Held-To-Maturity

 

 

8,353

 

 

 

759

 

 

 

7,594

 

 

N.M.

 

 

 

1,141

 

Deferred income taxes

 

 

452

 

 

 

645

 

 

 

(193

)

 

 

(29.9

)%

 

 

545

 

Investment in unconsolidated joint venture

 

 

 

 

 

1,859

 

 

 

(1,859

)

 

 

(100.0

)%

 

 

 

Other assets

 

 

3,004

 

 

 

547

 

 

 

2,457

 

 

 

449.2

%

 

 

2,035

 

Total assets

 

$

209,325

 

 

 

202,776

 

 

 

6,549

 

 

 

3.2

%

 

 

214,080

 

Current liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable - trade

 

 

40,525

 

 

 

38,247

 

 

 

2,278

 

 

 

6.0

%

 

 

42,540

 

Accounts payable - capital expenditures

 

 

176

 

 

 

68

 

 

 

108

 

 

 

158.8

%

 

 

348

 

Operating lease liability - current

 

 

2,878

 

 

 

2,316

 

 

 

562

 

 

 

24.3

%

 

 

2,736

 

Deferred revenue

 

 

679

 

 

 

375

 

 

 

304

 

 

 

81.1

%

 

 

540

 

Accrued expenses

 

 

11,019

 

 

 

11,684

 

 

 

(665

)

 

 

(5.7

)%

 

 

14,839

 

Income taxes payable - current

 

 

646

 

 

 

1,413

 

 

 

(767

)

 

 

(54.3

)%

 

 

229

 

Total current liabilities

 

 

55,923

 

 

 

54,103

 

 

 

1,820

 

 

 

3.4

%

 

 

61,232

 

Operating lease liability - long-term

 

 

7,914

 

 

 

4,008

 

 

 

3,906

 

 

 

97.5

%

 

 

6,821

 

Income taxes payable - long-term

 

 

3,099

 

 

 

3,325

 

 

 

(226

)

 

 

(6.8

)%

 

 

3,326

 

Deferred income taxes

 

 

4,918

 

 

 

6,089

 

 

 

(1,171

)

 

 

(19.2

)%

 

 

5,330

 

Deferred compensation

 

 

9,017

 

 

 

8,000

 

 

 

1,017

 

 

 

12.7

%

 

 

8,365

 

Total liabilities

 

 

80,871

 

 

 

75,525

 

 

 

5,346

 

 

 

7.1

%

 

 

85,074

 

Shareholders' equity

 

 

128,454

 

 

 

127,251

 

 

 

1,203

 

 

 

0.9

%

 

 

129,006

 

Total liabilities and shareholders'

equity

 

$

209,325

 

 

 

202,776

 

 

 

6,549

 

 

 

3.2

%

 

 

214,080

 

Shares outstanding

 

 

12,210

 

 

 

12,303

 

 

 

(93

)

 

 

(0.8

)%

 

 

12,313

 

* Derived from audited financial statements.

CULP, INC.

SUMMARY OF CASH AND INVESTMENTS

OCTOBER 31, 2021, NOVEMBER 1, 2020, AND MAY 2, 2021

Unaudited

(Amounts in Thousands)

 

 

 

Amounts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

October 31,

 

 

November 1,

 

 

May 2,

 

 

 

2021

 

 

2020

 

 

2021*

 

Cash and Investments

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

16,956

 

 

$

45,288

 

 

$

37,009

 

Short-term investments - Available for Sale

 

 

9,709

 

 

 

5,462

 

 

 

5,542

 

Short-term investments - Held-To-Maturity

 

 

1,564

 

 

 

5,005

 

 

 

3,161

 

Long-term investments - Held-To-Maturity

 

 

8,353

 

 

 

759

 

 

 

1,141

 

Total Cash and Investments

 

$

36,582

 

 

$

56,514

 

 

$

46,853

 

 

 

 

 

 

 

 

 

 

 

 

 

 

* Derived from audited financial statements.

CULP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED OCTOBER 31, 2021, AND NOVEMBER 1, 2020

Unaudited

(Amounts in Thousands)

 

 

 

SIX MONTHS ENDED

 

 

 

Amounts

 

 

 

October 31,

 

 

November 1,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

3,101

 

 

$

(349

)

Adjustments to reconcile net income (loss) to net cash (used in)

provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation

 

 

3,471

 

 

 

3,538

 

Amortization

 

 

267

 

 

 

235

 

Stock-based compensation

 

 

709

 

 

 

474

 

Deferred income taxes

 

 

(319

)

 

 

4,419

 

Realized (gain) loss from the sale of short-term investments available for sale

 

 

(4

)

 

 

6

 

Income from investment in unconsolidated joint venture

 

 

 

 

 

(167

)

Foreign currency exchange loss

 

 

170

 

 

 

723

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

5,441

 

 

 

(7,663

)

Inventories

 

 

(7,750

)

 

 

602

 

Other current assets

 

 

39

 

 

 

(1,175

)

Other assets

 

 

(987

)

 

 

(40

)

Accounts payable

 

 

(2,269

)

 

 

14,156

 

Deferred revenue

 

 

139

 

 

 

(127

)

Accrued expenses and deferred compensation

 

 

(2,908

)

 

 

6,019

 

Income taxes

 

 

(428

)

 

 

2,052

 

Net cash (used in) provided by operating activities

 

 

(1,328

)

 

 

22,703

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(3,901

)

 

 

(2,041

)

Proceeds from the sale of equipment

 

 

 

 

 

12

 

Investment in unconsolidated joint venture

 

 

 

 

 

(90

)

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

 

 

3,200

 

 

 

1,800

 

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

 

 

(8,876

)

 

 

(1,245

)

Purchase of short-term investments (Available for Sale)

 

 

(4,371

)

 

 

(5,010

)

Proceeds from the sale of short-term investments (Available for Sale)

 

 

306

 

 

 

455

 

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

 

 

 

 

 

77

 

Purchase of long-term investments (rabbi trust)

 

 

(580

)

 

 

(257

)

Net cash used in investing activities

 

 

(14,222

)

 

 

(6,299

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Payments associated with lines of credit

 

 

 

 

 

(30,772

)

Payment associated with Paycheck Protection Program Loan

 

 

 

 

 

(7,606

)

Dividends paid

 

 

(2,699

)

 

 

(2,583

)

Common stock repurchased

 

 

(1,752

)

 

 

 

Common stock surrendered for payment of withholding taxes payable

 

 

(50

)

 

 

(25

)

Payments of debt issuance costs

 

 

 

 

 

(15

)

Net cash used in financing activities

 

 

(4,501

)

 

 

(41,001

)

Effect of exchange rate changes on cash and cash equivalents

 

 

(2

)

 

 

95

 

Decrease in cash and cash equivalents

 

 

(20,053

)

 

 

(24,502

)

Cash and cash equivalents at beginning of year

 

 

37,009

 

 

 

69,790

 

Cash and cash equivalents at end of period

 

$

16,956

 

 

$

45,288

 

Free Cash Flow (1)

 

$

(5,811

)

 

$

20,499

 

Reconciliation of Free Cash Flow (1):

 

 

FY 2022

 

 

FY 2021

 

A) Net cash (used in) provided by operating activities

 

$

(1,328

)

 

 

22,703

 

B) Minus: Capital Expenditures

 

 

(3,901

)

 

 

(2,041

)

C) Plus: Proceeds from the sale of equipment

 

 

 

 

 

12

 

D) Minus: Investment in unconsolidated joint venture

 

 

 

 

 

(90

)

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

 

 

 

 

 

77

 

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

 

 

(580

)

 

 

(257

)

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

 

 

(2

)

 

 

95

 

Free Cash Flow

 

$

(5,811

)

 

 

20,499

 

CULP, INC.

STATEMENTS OF OPERATIONS BY SEGMENT

FOR THE THREE MONTHS ENDED OCTOBER 31, 2021, AND NOVEMBER 1, 2020

Unaudited

(Amounts in Thousands)

 

 

 

THREE MONTHS ENDED

 

 

 

Amounts

 

 

 

 

 

 

Percent of Total Sales

 

 

 

October 31,

 

 

November 1,

 

 

% Over

 

 

October 31,

 

 

November 1,

 

Net Sales by Segment

 

2021

 

 

2020

 

 

(Under)

 

 

2021

 

 

2020

 

Mattress Fabrics

 

$

40,883

 

 

 

40,030

 

 

 

2.1

%

 

 

54.8

%

 

 

52.1

%

Upholstery Fabrics

 

 

33,678

 

 

 

36,821

 

 

 

(8.5

)%

 

 

45.2

%

 

 

47.9

%

Net Sales

 

$

74,561

 

 

 

76,851

 

 

 

(3.0

)%

 

 

100.0

%

 

 

100.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit Margin

 

Mattress Fabrics

 

$

6,146

 

 

 

7,584

 

 

 

(19.0

)%

 

 

15.0

%

 

 

18.9

%

Upholstery Fabrics

 

 

4,581

 

 

 

6,677

 

 

 

(31.4

)%

 

 

13.6

%

 

 

18.1

%

Gross Profit

 

$

10,727

 

 

 

14,261

 

 

 

(24.8

)%

 

 

14.4

%

 

 

18.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, General and Administrative

Expenses by Segment

 

 

 

 

 

 

 

 

 

 

 

 

 

Percent of Sales

 

Mattress Fabrics

 

$

3,007

 

 

 

3,202

 

 

 

(6.1

)%

 

 

7.4

%

 

 

8.0

%

Upholstery Fabrics

 

 

3,553

 

 

 

3,390

 

 

 

4.8

%

 

 

10.5

%

 

 

9.2

%

Unallocated Corporate expenses

 

 

2,527

 

 

 

3,151

 

 

 

(19.8

)%

 

 

3.4

%

 

 

4.1

%

Selling, General and Administrative

Expenses

 

$

9,087

 

 

 

9,743

 

 

 

(6.7

)%

 

 

12.2

%

 

 

12.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from operations

by Segment

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income Margin

 

Mattress Fabrics

 

$

3,139

 

 

 

4,382

 

 

 

(28.4

)%

 

 

7.7

%

 

 

10.9

%

Upholstery Fabrics

 

 

1,028

 

 

 

3,287

 

 

 

(68.7

)%

 

 

3.1

%

 

 

8.9

%

Unallocated corporate expenses

 

 

(2,527

)

 

 

(3,151

)

 

 

(19.8

)%

 

 

(3.4

)%

 

 

(4.1

)%

Income from Operations

 

$

1,640

 

 

 

4,518

 

 

 

(63.7

)%

 

 

2.2

%

 

 

5.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation Expense by Segment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mattress Fabrics

 

$

1,550

 

 

 

1,501

 

 

 

3.3

%

 

 

 

 

 

 

 

 

Upholstery Fabrics

 

 

195

 

 

 

215

 

 

 

(9.3

)%

 

 

 

 

 

 

 

 

Depreciation Expense

 

$

1,745

 

 

 

1,716

 

 

 

1.7

%

 

 

 

 

 

 

 

 

CULP, INC.

STATEMENTS OF OPERATIONS BY SEGMENT

FOR THE SIX MONTHS ENDED OCTOBER 31, 2021, AND NOVEMBER 1, 2020

Unaudited

(Amounts in Thousands)

 

 

 

SIX MONTHS ENDED

 

 

 

Amounts

 

 

 

 

 

 

Percent of Total Sales

 

 

 

October 31,

 

 

November 1,

 

 

% Over

 

 

October 31,

 

 

November 1,

 

Net Sales by Segment

 

2021

 

 

2020

 

 

(Under)

 

 

2021

 

 

2020

 

Mattress Fabrics

 

$

83,941

 

 

 

76,133

 

 

 

10.3

%

 

 

53.3

%

 

 

53.9

%

Upholstery Fabrics

 

 

73,667

 

 

 

65,182

 

 

 

13.0

%

 

 

46.7

%

 

 

46.1

%

Net Sales

 

$

157,608

 

 

 

141,315

 

 

 

11.5

%

 

 

100.0

%

 

 

100.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit by Segment

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit Margin

 

Mattress Fabrics

 

$

12,941

 

 

 

12,191

 

 

 

6.2

%

 

 

15.4

%

 

 

16.0

%

Upholstery Fabrics

 

 

10,285

 

 

 

11,971

 

 

 

(14.1

)%

 

 

14.0

%

 

 

18.4

%

Gross Profit

 

$

23,226

 

 

 

24,162

 

 

 

(3.9

)%

 

 

14.7

%

 

 

17.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, General, and Administrative

Expenses by Segment

 

 

 

 

 

 

 

 

 

 

 

 

 

Percent of Total Sales

 

Mattress Fabrics

 

$

6,191

 

 

 

5,964

 

 

 

3.8

%

 

 

7.4

%

 

 

7.8

%

Upholstery Fabrics

 

 

6,990

 

 

 

6,570

 

 

 

6.4

%

 

 

9.5

%

 

 

10.1

%

Unallocated Corporate expenses

 

 

5,087

 

 

 

5,227

 

 

 

(2.7

)%

 

 

3.2

%

 

 

3.7

%

Selling, General, and

Administrative Expenses

 

$

18,268

 

 

$

17,761

 

 

 

2.9

%

 

 

11.6

%

 

 

12.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from Operations by Segment

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income Margin

 

Mattress Fabrics

 

$

6,750

 

 

 

6,227

 

 

 

8.4

%

 

 

8.0

%

 

 

8.2

%

Upholstery Fabrics

 

 

3,295

 

 

 

5,401

 

 

 

(39.0

)%

 

 

4.5

%

 

 

8.3

%

Unallocated corporate expenses

 

 

(5,087

)

 

 

(5,227

)

 

 

(2.7

)%

 

 

(3.2

)%

 

 

(3.7

)%

Income from operations

 

$

4,958

 

 

 

6,401

 

 

 

(22.5

)%

 

 

3.1

%

 

 

4.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on Capital (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mattress Fabrics

 

 

17.1

%

 

 

7.6

%

 

 

125.0

%

 

 

 

 

 

 

 

 

Upholstery Fabrics

 

 

60.2

%

 

 

46.6

%

 

 

29.2

%

 

 

 

 

 

 

 

 

Unallocated Corporate

 

N.M.

 

 

N.M.

 

 

N.M.

 

 

 

 

 

 

 

 

 

Consolidated

 

 

11.8

%

 

 

5.0

%

 

 

136.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital Employed (1) (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mattress Fabrics

 

$

78,142

 

 

 

61,609

 

 

 

26.8

%

 

 

 

 

 

 

 

 

Upholstery Fabrics

 

 

17,732

 

 

 

16,980

 

 

 

4.4

%

 

 

 

 

 

 

 

 

Unallocated Corporate

 

 

3,577

 

 

 

2,270

 

 

 

57.6

%

 

 

 

 

 

 

 

 

Consolidated

 

$

99,451

 

 

 

80,859

 

 

 

23.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation Expense by Segment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mattress Fabrics

 

$

3,071

 

 

 

3,132

 

 

 

(1.9

)%

 

 

 

 

 

 

 

 

Upholstery Fabrics

 

 

400

 

 

 

406

 

 

 

(1.5

)%

 

 

 

 

 

 

 

 

Depreciation Expense

 

$

3,471

 

 

 

3,538

 

 

 

(1.9

)%

 

 

 

 

 

 

 

 

Notes

 

(1) See return on capital employed by segment pages at the back of this presentation for calculations.

 

(2) The capital employed balances are as of October 31, 2021, and November 1, 2020.

CULP, INC.

RECONCILIATION OF SELECTED INCOME STATEMENT INFORMATION TO ADJUSTED RESULTS

FOR THE SIX MONTHS ENDED NOVEMBER 1, 2020

Unaudited

(Amounts in Thousands, Except for Per Share Data)

 

 

 

As Reported

 

 

 

 

 

 

November 1, 2020

 

 

 

November 1,

 

 

 

 

 

 

Adjusted

 

 

 

2020

 

 

Adjustments

 

 

Results

 

Income before income taxes

 

$

5,421

 

 

 

 

 

 

5,421

 

Income tax expense (1)

 

 

(5,937

)

 

 

4,099

 

 

 

(1,838

)

Income from investment in

unconsolidated joint venture

 

167

 

 

 

 

 

 

167

 

Net (loss) income

 

$

(349

)

 

 

4,099

 

 

 

3,750

 

Net (loss) income per share - basic

 

$

(0.03

)

 

 

 

 

 

$

0.31

 

Net (loss) income per share - diluted

 

$

(0.03

)

 

 

 

 

 

$

0.30

 

Average shares outstanding-basic

 

 

12,293

 

 

 

 

 

 

 

12,293

 

Average shares outstanding-diluted

 

 

12,293

 

 

 

 

 

 

 

12,305

 

Notes

 

(1) The $4.1 million adjustment represents a $7.6 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 2021 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 OCTOBER 31, 2021, AND NOVEMBER 1, 2020

Unaudited

(Amounts in Thousands)

 

 

 

Quarter

Ended

 

 

Quarter

Ended

 

 

Quarter

Ended

 

 

Quarter

Ended

 

 

Trailing

12 Months

 

 

 

January 31,

 

 

May 2,

 

 

August 1,

 

 

October 31,

 

 

October 31,

 

 

 

2021

 

 

2021

 

 

2021

 

 

2021

 

 

2021

 

Net income

 

$

2,082

 

 

$

1,485

 

 

$

2,250

 

 

$

851

 

 

$

6,668

 

Income tax expense

 

 

899

 

 

 

857

 

 

 

905

 

 

 

444

 

 

 

3,105

 

Interest income, net

 

 

(90

)

 

 

(36

)

 

 

(74

)

 

 

(59

)

 

 

(259

)

Gain on bargain purchase

 

 

 

 

 

(819

)

 

 

 

 

 

 

 

 

(819

)

Depreciation expense

 

 

1,665

 

 

 

1,643

 

 

 

1,726

 

 

 

1,745

 

 

 

6,779

 

Amortization expense

 

 

115

 

 

 

116

 

 

 

121

 

 

 

146

 

 

 

498

 

Stock based compensation

 

 

292

 

 

 

485

 

 

 

274

 

 

 

435

 

 

 

1,486

 

Adjusted EBITDA

 

$

4,963

 

 

$

3,731

 

 

$

5,202

 

 

$

3,562

 

 

$

17,458

 

% Net Sales

 

 

6.3

%

 

 

4.7

%

 

 

6.3

%

 

 

4.8

%

 

 

5.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter

Ended

 

 

Quarter

Ended

 

 

Quarter

Ended

 

 

Quarter

Ended

 

 

Trailing

12 Months

 

 

 

February 2,

 

 

May 3,

 

 

August 2,

 

 

November 1,

 

 

November 1,

 

 

 

2020

 

 

2020

 

 

2020

 

 

2020

 

 

2020

 

Net (loss) income

 

$

(4,207

)

 

$

(27,825

)

 

$

(2,733

)

 

$

2,384

 

 

$

(32,381

)

Loss before income taxes from

discontinued operation

 

 

7,824

 

 

 

8,698

 

 

 

 

 

 

 

 

 

16,522

 

Income tax expense (benefit) from

continuing operations

 

 

1,619

 

 

 

(2,237

)

 

 

4,324

 

 

 

1,613

 

 

 

5,319

 

Interest income, net

 

 

(258

)

 

 

(37

)

 

 

(7

)

 

 

(59

)

 

 

(361

)

Asset impairments from continuing

operations

 

 

 

 

 

13,712

 

 

 

 

 

 

 

 

 

13,712

 

Restructuring credit

 

 

(35

)

 

 

 

 

 

 

 

 

 

 

 

(35

)

Depreciation expense - continuing

operations

 

 

1,891

 

 

 

1,882

 

 

 

1,822

 

 

 

1,716

 

 

 

7,311

 

Amortization expense - continuing

operations

 

 

102

 

 

 

117

 

 

 

118

 

 

 

117

 

 

 

454

 

Stock based compensation

 

 

364

 

 

 

(199

)

 

 

126

 

 

 

348

 

 

 

639

 

Adjusted EBITDA

 

$

7,300

 

 

$

(5,889

)

 

$

3,650

 

 

$

6,119

 

 

$

11,180

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

% Net Sales

 

 

10.7

%

 

 

(12.4

)%

 

 

5.7

%

 

 

8.0

%

 

 

4.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

% Over (Under)

 

 

(32.0

)%

 

N.M.

 

 

 

42.5

%

 

 

(41.8

)%

 

 

56.2

%

CULP, INC.

RETURN ON CAPITAL EMPLOYED BY SEGMENT

FOR THE TWELVE MONTHS ENDED OCTOBER 31, 2021

Unaudited

(Amounts in Thousands)

 

 

Adjusted

 

 

 

 

 

 

 

 

Operating Income

 

 

 

 

 

 

 

 

Twelve Months

 

Average

 

Return on

 

 

Ended

 

Capital

 

Avg. Capital

 

 

October 31, 2021 (1)

 

Employed (3)

 

Employed (2)

 

Mattress Fabrics

$

12,321

 

$

71,960

 

 

17.1

%

Upholstery Fabrics

 

9,771

 

 

16,223

 

 

60.2

%

Unallocated Corporate

 

(11,458

)

 

1,737

 

N.M.

 

Total

$

10,634

 

$

89,919

 

 

11.8

%

Average Capital Employed

As of the three Months Ended October 31, 2021

 

 

As of the three Months Ended August 1, 2021

 

 

As of the three Months Ended May 2, 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)

$

96,960

 

 

56,292

 

 

56,073

 

 

209,325

 

 

$

96,416

 

 

55,617

 

 

60,215

 

 

212,248

 

 

$

97,431

 

 

54,305

 

 

62,344

 

 

214,080

 

Total liabilities

 

(18,818

)

 

(38,560

)

 

(23,493

)

 

(80,871

)

 

 

(21,298

)

 

(39,983

)

 

(21,418

)

 

(82,699

)

 

 

(22,410

)

 

(38,709

)

 

(23,955

)

 

(85,074

)

Subtotal

$

78,142

 

$

17,732

 

$

32,580

 

$

128,454

 

 

$

75,118

 

$

15,634

 

$

38,797

 

$

129,549

 

 

$

75,021

 

$

15,596

 

$

38,389

 

$

129,006

 

Cash and cash equivalents

 

 

 

 

 

(16,956

)

 

(16,956

)

 

 

 

 

 

 

(26,061

)

 

(26,061

)

 

 

 

 

 

 

(37,009

)

 

(37,009

)

Short-term investments - Available-For-

Sale

 

 

 

 

 

(9,709

)

 

(9,709

)

 

 

 

 

 

 

(9,698

)

 

(9,698

)

 

 

 

 

 

 

(5,542

)

 

(5,542

)

Short-term investments - Held-To-

Maturity

 

 

 

 

 

(1,564

)

 

(1,564

)

 

 

 

 

 

 

(1,661

)

 

(1,661

)

 

 

 

 

 

 

(3,161

)

 

(3,161

)

Current income taxes receivable

 

 

 

 

 

(613

)

 

(613

)

 

 

 

 

 

 

(524

)

 

(524

)

 

 

 

 

 

 

 

 

 

Long-term investments - Held-To-Maturity

 

 

 

 

 

(8,353

)

 

(8,353

)

 

 

 

 

 

 

(6,629

)

 

(6,629

)

 

 

 

 

 

 

(1,141

)

 

(1,141

)

Long-term investments - Rabbi Trust

 

 

 

 

 

(9,036

)

 

(9,036

)

 

 

 

 

 

 

(8,841

)

 

(8,841

)

 

 

 

 

 

 

(8,415

)

 

(8,415

)

Deferred income taxes - non-current

 

 

 

 

 

(452

)

 

(452

)

 

 

 

 

 

 

(455

)

 

(455

)

 

 

 

 

 

 

(545

)

 

(545

)

Income taxes payable - current

 

 

 

 

 

646

 

 

646

 

 

 

 

 

 

 

253

 

 

253

 

 

 

 

 

 

 

229

 

 

229

 

Income taxes payable - long-term

 

 

 

 

 

3,099

 

 

3,099

 

 

 

 

 

 

 

3,365

 

 

3,365

 

 

 

 

 

 

 

3,326

 

 

3,326

 

Deferred income taxes - non-current

 

 

 

 

 

4,918

 

 

4,918

 

 

 

 

 

 

 

4,917

 

 

4,917

 

 

 

 

 

 

 

5,330

 

 

5,330

 

Deferred compensation

 

 

 

 

 

9,017

 

 

9,017

 

 

 

 

 

 

 

8,795

 

 

8,795

 

 

 

 

 

 

 

8,365

 

 

8,365

 

Total Capital Employed

$

78,142

 

$

17,732

 

$

3,577

 

$

99,451

 

 

$

75,118

 

$

15,634

 

$

2,258

 

$

93,010

 

 

$

75,021

 

$

15,596

 

$

(174

)

$

90,443

 

CULP, INC.

RETURN ON CAPITAL EMPLOYED BY SEGMENT - CONTINUED

FOR THE TWELVE MONTHS ENDED OCTOBER 31, 2021

Unaudited

(Amounts in Thousands)

 

 

As of the three Months Ended January 31, 2021

 

 

As of the three Months Ended November 1, 2020

 

 

Mattress

 

Upholstery

 

Unallocated

 

 

 

 

 

Mattress

 

Upholstery

 

Unallocated

 

 

 

 

 

Fabrics

 

Fabrics

 

Corporate

 

Total

 

 

Fabrics

 

Fabrics

 

Corporate

 

Total

 

Total assets (4)

$

91,412

 

 

53,233

 

 

67,333

 

 

211,978

 

 

$

83,237

 

 

47,267

 

 

72,272

 

 

202,776

 

Total liabilities

 

(21,503

)

 

(38,061

)

 

(24,052

)

 

(83,616

)

 

 

(21,628

)

 

(30,287

)

 

(23,610

)

 

(75,525

)

Subtotal

$

69,909

 

$

15,172

 

$

43,281

 

$

128,362

 

 

$

61,609

 

$

16,980

 

$

48,662

 

$

127,251

 

Cash and cash equivalents

 

 

 

 

 

(35,987

)

 

(35,987

)

 

 

 

 

 

 

(45,288

)

 

(45,288

)

Short-term investments - Available-For-

Sale

 

 

 

 

 

(5,548

)

 

(5,548

)

 

 

 

 

 

 

(5,462

)

 

(5,462

)

Short-term investments - Held-To-

Maturity

 

 

 

 

 

(9,785

)

 

(9,785

)

 

 

 

 

 

 

(5,005

)

 

(5,005

)

Long-term investments - Held-To-Maturity

 

 

 

 

 

(512

)

 

(512

)

 

 

 

 

 

 

(759

)

 

(759

)

Long-term investments - Rabbi Trust

 

 

 

 

 

(8,232

)

 

(8,232

)

 

 

 

 

 

 

(8,060

)

 

(8,060

)

Deferred income taxes - non-current

 

 

 

 

 

(640

)

 

(640

)

 

 

 

 

 

 

(645

)

 

(645

)

Income taxes payable - current

 

 

 

 

 

1,129

 

 

1,129

 

 

 

 

 

 

 

1,413

 

 

1,413

 

Income taxes payable - long-term

 

 

 

 

 

3,325

 

 

3,325

 

 

 

 

 

 

 

3,325

 

 

3,325

 

Deferred income taxes - non-current

 

 

 

 

 

5,543

 

 

5,543

 

 

 

 

 

 

 

6,089

 

 

6,089

 

Deferred compensation

 

 

 

 

 

8,179

 

 

8,179

 

 

 

 

 

 

 

8,000

 

 

8,000

 

Total Capital Employed

$

69,909

 

$

15,172

 

$

753

 

$

85,834

 

 

$

61,609

 

$

16,980

 

$

2,270

 

$

80,859

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mattress

 

Upholstery

 

Unallocated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fabrics

 

Fabrics

 

Corporate

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Capital Employed (3)

$

71,960

 

$

16,223

 

$

1,737

 

$

89,919

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 October 31, 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 October 31, 2021, August 1, 2021, May 2, 2021, January 31, 2021, and November 1, 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 NOVEMBER 1, 2020

Unaudited

(Amounts in Thousands)

 

 

Adjusted

 

 

 

 

 

 

 

 

Operating Income

 

 

 

 

 

 

 

 

Twelve Months

 

Average

 

Return on

 

 

Ended

 

Capital

 

Avg. Capital

 

 

November 1, 2020 (1)

 

Employed (3)

 

Employed (2)

 

Mattress Fabrics

$

5,241

 

$

69,290

 

 

7.6

%

Upholstery Fabrics

 

8,920

 

 

19,133

 

 

46.6

%

Unallocated Corporate

 

(9,353

)

 

8,166

 

N.M.

 

Total

$

4,808

 

$

96,589

 

 

5.0

%

Average Capital Employed

As of the three Months Ended November 1, 2020

 

 

As of the three Months Ended August 2, 2020

 

 

As of the three Months Ended May 3, 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)

$

83,237

 

 

47,267

 

 

72,272

 

 

202,776

 

 

$

79,016

 

 

41,239

 

 

64,332

 

 

184,587

 

 

$

82,060

 

 

38,517

 

 

94,507

 

 

215,084

 

Total liabilities (5)

 

(21,628

)

 

(30,287

)

 

(23,610

)

 

(75,525

)

 

 

(14,444

)

 

(23,644

)

 

(20,630

)

 

(58,718

)

 

 

(9,239

)

 

(20,908

)

 

(55,239

)

 

(85,386

)

Subtotal

$

61,609

 

$

16,980

 

$

48,662

 

$

127,251

 

 

$

64,572

 

$

17,595

 

$

43,702

 

$

125,869

 

 

$

72,821

 

$

17,609

 

$

39,268

 

$

129,698

 

Cash and cash equivalents

 

 

 

 

 

(45,288

)

 

(45,288

)

 

 

 

 

 

 

(39,986

)

 

(39,986

)

 

 

 

 

 

 

(69,790

)

 

(69,790

)

Short-term investments –

Available-For-Sale

 

 

 

 

 

(5,462

)

 

(5,462

)

 

 

 

 

 

 

(983

)

 

(983

)

 

 

 

 

 

 

(923

)

 

(923

)

Short-term investments –

Held-To-Maturity

 

 

 

 

 

(5,005

)

 

(5,005

)

 

 

 

 

 

 

(5,092

)

 

(5,092

)

 

 

 

 

 

 

(4,271

)

 

(4,271

)

Current income taxes receivable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(782

)

 

(782

)

 

 

 

 

 

 

(1,585

)

 

(1,585

)

Long-term investments –

Held-To-Maturity

 

 

 

 

 

(759

)

 

(759

)

 

 

 

 

 

 

(1,314

)

 

(1,314

)

 

 

 

 

 

 

(2,076

)

 

(2,076

)

Long-term investments - Rabbi Trust

 

 

 

 

 

(8,060

)

 

(8,060

)

 

 

 

 

 

 

(7,916

)

 

(7,916

)

 

 

 

 

 

 

(7,834

)

 

(7,834

)

Deferred income taxes - non-current

 

 

 

 

 

(645

)

 

(645

)

 

 

 

 

 

 

(593

)

 

(593

)

 

 

 

 

 

 

(793

)

 

(793

)

Line of credit - China operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,015

 

 

1,015

 

Paycheck Protection Program Loan

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7,606

 

 

7,606

 

Income taxes payable - current

 

 

 

 

 

1,413

 

 

1,413

 

 

 

 

 

 

 

613

 

 

613

 

 

 

 

 

 

 

395

 

 

395

 

Line of credit - U.S. operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

29,750

 

 

29,750

 

Income taxes payable - long-term

 

 

 

 

 

3,325

 

 

3,325

 

 

 

 

 

 

 

3,591

 

 

3,591

 

 

 

 

 

 

 

3,796

 

 

3,796

 

Deferred income taxes - non-current

 

 

 

 

 

6,089

 

 

6,089

 

 

 

 

 

 

 

5,311

 

 

5,311

 

 

 

 

 

 

 

1,818

 

 

1,818

 

Deferred compensation

 

 

 

 

 

8,000

 

 

8,000

 

 

 

 

 

 

 

7,869

 

 

7,869

 

 

 

 

 

 

 

7,720

 

 

7,720

 

Total Capital Employed

$

61,609

 

$

16,980

 

$

2,270

 

$

80,859

 

 

$

64,572

 

$

17,595

 

$

4,420

 

$

86,587

 

 

$

72,821

 

$

17,609

 

$

4,096

 

$

94,526

 

CULP INC.

RETURN ON CAPITAL EMPLOYED BY SEGMENT - CONTINUED

FOR THE TWELVE MONTHS ENDED NOVEMBER 1, 2020

Unaudited

(Amounts in Thousands)

 

 

As of the three Months Ended February 2, 2020

 

 

As of the three Months Ended November 3, 2019

 

 

Mattress

 

Upholstery

 

Unallocated

 

 

 

 

 

Mattress

 

Upholstery

 

Unallocated

 

 

 

 

 

Fabrics

 

Fabrics

 

Corporate

 

Total

 

 

Fabrics

 

Fabrics

 

Corporate

 

Total

 

Total assets (4)

$

88,641

 

 

42,248

 

 

81,251

 

 

212,140

 

 

$

84,473

 

 

43,313

 

 

105,736

 

 

233,522

 

Total liabilities (5)

 

(11,586

)

 

(18,179

)

 

(22,279

)

 

(52,044

)

 

 

(14,079

)

 

(23,902

)

 

(29,619

)

 

(67,600

)

Subtotal

$

77,055

 

$

24,069

 

$

58,972

 

$

160,096

 

 

$

70,394

 

$

19,411

 

$

76,117

 

$

165,922

 

Cash and cash equivalents

 

 

 

 

 

(21,640

)

 

(21,640

)

 

 

 

 

 

 

(46,955

)

 

(46,955

)

Short-term investments –

Available for Sale

 

 

 

 

 

(7,580

)

 

(7,580

)

 

 

 

 

 

 

 

 

 

Short-term investments –

Held-to-Maturity

 

 

 

 

 

(3,171

)

 

(3,171

)

 

 

 

 

 

 

 

 

 

Current income taxes receivable

 

 

 

 

 

(776

)

 

(776

)

 

 

 

 

 

 

(776

)

 

(776

)

Current assets - Discontinued Operation

 

 

 

 

 

(4,738

)

 

(4,738

)

 

 

 

 

 

 

(4,760

)

 

(4,760

)

Long-term investments –

Held-to-Maturity

 

 

 

 

 

(2,224

)

 

(2,224

)

 

 

 

 

 

 

 

 

 

Long-term investments - Rabbi Trust

 

 

 

 

 

(7,804

)

 

(7,804

)

 

 

 

 

 

 

(7,575

)

 

(7,575

)

Noncurrent income taxes receivable

 

 

 

 

 

(733

)

 

(733

)

 

 

 

 

 

 

(733

)

 

(733

)

Deferred income taxes - non-current

 

 

 

 

 

(920

)

 

(920

)

 

 

 

 

 

 

(511

)

 

(511

)

Long-term note receivable affiliated with

discontinued operation

 

 

 

 

 

(1,800

)

 

(1,800

)

 

 

 

 

 

 

(1,800

)

 

(1,800

)

Noncurrent assets - Discontinued Operation

 

 

 

 

 

(9,241

)

 

(9,241

)

 

 

 

 

 

 

(22,950

)

 

(22,950

)

Current liabilities - Discontinued Operation

 

 

 

 

 

2,094

 

 

2,094

 

 

 

 

 

 

 

1,907

 

 

1,907

 

Income taxes payable - current

 

 

 

 

 

455

 

 

455

 

 

 

 

 

 

 

1,539

 

 

1,539

 

Contingent consideration affiliated with

discontinued operation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,006

 

 

6,006

 

Income taxes payable - long-term

 

 

 

 

 

3,442

 

 

3,442

 

 

 

 

 

 

 

3,442

 

 

3,442

 

Deferred income taxes - non-current

 

 

 

 

 

2,013

 

 

2,013

 

 

 

 

 

 

 

3,283

 

 

3,283

 

Deferred compensation

 

 

 

 

 

7,637

 

 

7,637

 

 

 

 

 

 

 

7,429

 

 

7,429

 

Noncurrent liabilities - Discontinued Operation

 

 

 

 

 

3,501

 

 

3,501

 

 

 

 

 

 

 

3,550

 

 

3,550

 

Non-controlling interest - Discontinued Operation

 

 

 

 

 

(253

)

 

(253

)

 

 

 

 

 

 

(4,402

)

 

(4,402

)

Total Capital Employed

$

77,055

 

$

24,069

 

$

17,234

 

$

118,358

 

 

$

70,394

 

$

19,411

 

$

12,811

 

$

102,616

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mattress

 

Upholstery

 

Unallocated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fabrics

 

Fabrics

 

Corporate

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Capital Employed (3)

$

69,290

 

$

19,133

 

$

8,166

 

$

96,589

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 November 1, 2020 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 November 1, 2020, August 2, 2020, May 3, 2020, February 2, 2020, and November 2, 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 OCTOBER 31, 2021, AND NOVEMBER 1, 2020

Unaudited

(Amounts in Thousands)

 

 

 

Quarter Ended