Investor Presentation
March 2024
1
Forward Looking Statements
This presentation 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, projections, targets, or trends for our future operations, strategic initiatives, production levels, new product launches, sales, profit margins, profitability, operating income, capital expenditures, working capital levels, cost savings, 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 dividends, share repurchases, liquidity, use of cash and cash requirements, borrowing capacity, investments, 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, including changes in U.S. trade enforcement priorities, 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. In addition, because our foreign operations use the U.S. dollar as their functional currency, changes in the exchange rate between the local currency of those operations and the U.S dollar can affect our reported profits from those foreign operations. 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 asset impairments, including impairments of property, plant, and equipment, inventory, or intangible assets, as well as the impact of valuation allowances applied against our net deferred income tax assets, 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, our success in diversifying our supply chain with reliable partners to effectively service our global platform could affect our operations and 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 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. Additional risks and uncertainties that we do not presently know about or that we currently consider to be immaterial may also affect our business operations and financial results.
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The Culp Story - Repositioning for Renewed Growth
1 | 2 | 3 | 4 | 5 |
Building on | Transforming | Accelerating | Maintaining | Clear road map |
a strong | our Mattress Fabrics | execution in our | disciplined capital | to renewed |
foundation | segment | Upholstery segment | allocation | growth |
3
Culp Today - Two Market Leading Businesses
Revenue Breakdown FY 2023
Mattress Fabrics | Upholstery Fabrics | |||
Market leader | Market leader | |||
Assets in N. America | Asset light | |||
Strong N. American supply chain | 47% | NYSE: CULP | 53% | Primarily Asian supply chain |
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Manufacturing + Sourcing | Key Metrics | |
• US, Canada, Haiti, China, | • | Market cap: $63.6M1 |
Vietnam, Turkey | • | Employees: ~1,0121 |
1. As of January 28, 2024
Understanding the Current Macro Situation - Moving Towards a "Normal" Market Environment
Pre-Covid | Covid Impact | Current Post-Covid | Return to |
Situation | Normal Market | ||
• Favorable long | • Accelerated | • Slow demand | • Return to long-term |
term growth | demand for home | - result of Covid | growth trend |
dynamics in | products | "pull forward" & inflation | • Timing unclear - |
both segments | |||
• Supply chain cost | expect next | ||
pressures / elevated | 12-18 months | ||
inventories |
5
Why We are Confident in the Long-Term Future of Culp
1 | Proven record of navigating | ||||||||
changing business conditions | |||||||||
2 | Positioned in healthy growing markets | ||||||||
3 | Powerful innovative engine | ||||||||
4 | Strong balance sheet | ||||||||
5 | Multiple repositioning initiatives | ||||||||
underway to strengthen Culp |
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CONFIDENCE REASON #1
Culp - Record of Adapting Well to Changing Business Conditions and Customer Preferences
Repositioning for renewed growth 2022+
Continued expansion / | |||
Reinvented business - | acquisitions | ||
2010-2020 | |||
shifted Upholstery | |||
Entered | |||
Fabrics to China | |||
Mattress Fabrics | 2000-2010 | ||
Company Founded | business | ||
for Upholstery Fabrics - | 1976 | ||
1972 |
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CONFIDENCE REASON #2 | |||||
Positioned in Historically Healthy Growing Markets | |||||
Pre-Covid: Solid Long Term | Ongoing Mattress | Pent-Up Demand for | |||
Growth in Both Segments | Replacements | Household Formations | |||
~5% | ~ | 10-13% | 25% | ||
2% | of population replaces | of Millennials live | |||
CAGR1 | CAGR2 | ||||
mattresses each year3 | with parents4 |
Domestic Mattress | Furniture | 1 in 8 moved back in last year4 |
Wholesale Dollar Sales | Store Sales | |
2001-2021 | 2001-2021 |
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- Raymond James, ISPA, US ITC - See Appendix for details
- Statista 2023 - See Appendix for details
- Based on management estimates and ISPA 2022 research
- https://www.propertymanagement.com/high-rent-and-job-losses-forced-1-in-8-millennials-to-move-back-in-with-their-parents-this-year/
CONFIDENCE REASON #3
Our Powerful Innovation Engine - A Key Differentiator Driving Market Share Gains
Consumer focused research
Speed to market
- Ecosystem of global platforms
- Express delivery
- Identify trends, preferences
- Cleanable performance fabrics
- Sustainability
- Health / Wellness
- Cooling 1
Customized mapping | |||
- | High tech, digital | ||
3 | 2 | - | 3D modeling |
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CONFIDENCE REASON #3
Culp - THE Industry Innovator
Upholstery Fabrics Segment
- FIRST to introduce suede upholstery fabrics to commercial residential market, followed by faux leather looks;
- FIRST with stain-resistant performance fabrics at mid-market price points, including iClean® and LiveSmart® brands
- FIRST to introduce performance + sustainability line of upholstery fabrics with LiveSmart Evolve® line
- FIRST to introduce Nanobionic® wellness-focused fabric for residential home furnishings industry
Mattress Segment
- FIRST to adopt on-shore,near-shore, and off-shore strategy to best support mattress cover customers
- FIRST to introduce LiveFurnish 3-D visual rendering technology to showcase mattress fabric designs while also reducing sampling costs, enhancing customization, allowing faster to market
- FIRST / early innovator with cooling + sustainability-focused mattress fabrics
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Disclaimer
Culp Inc. published this content on 06 March 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 06 March 2024 21:36:50 UTC.