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Culp Announces Results for Third Quarter Fiscal 2023

Culp, Inc. (NYSE: CULP) (together with its consolidated subsidiaries, “CULP”) today reported financial and operating results for the third quarter ended January 29, 2023.

Fiscal 2023 Third Quarter Financial Summary

  • Net sales were $52.5 million, down 34.6 percent compared with the prior-year period, with mattress fabrics sales down 35.8 percent and upholstery fabrics sales down 33.5 percent compared with the third quarter of last year.
  • Loss from operations was $(7.8) million, in line with expectations, as compared with income from operations of $1.1 million for the prior-year period.
  • The loss from operations for the third quarter of fiscal 2023 includes $711,000 in restructuring expense relating to a rationalization of the upholstery fabrics cut and sew platform located in Ouanaminthe, Haiti.
  • Net loss was $(9.0) million, or $(0.73) per diluted share, compared with a net loss of $(289,000), or $(0.02) per diluted share, for the prior-year period. The effective tax rate for the third quarter was negative (3.3)%, reflecting the company’s mix of taxable income between its U.S. and foreign jurisdictions during the period.
  • The company maintained a solid balance sheet, with total cash and investments of $16.7 million and no outstanding borrowings as of January 29, 2023. (See summary of cash and investments table at the back of this press release.)
  • Cash flow from operations and free cash flow were $4.6 million and $2.5 million, respectively, for the first nine months of fiscal 2023, compared with cash flow from operations and free cash flow of negative $(12.4) million and negative $(18.5) million, respectively, for the first nine months of fiscal 2022. (See reconciliation table at the back of this press release.)
  • On January 19, 2023, the company closed on a new three-year asset-based revolving credit facility of up to $35 million.

Financial Outlook

  • The company continues to navigate a difficult demand environment as a result of elevated inventory levels at manufacturers and retailers, as well as shifting consumer spending trends and weakening consumer confidence. The company is also experiencing operating inefficiencies due to this reduced demand as well as an improving but still inexperienced labor force. Although CULP remains well-positioned over the long term with its product-driven strategy and flexible global platform, current conditions are likely to continue pressuring results through at least the end of fiscal 2023.
  • Due to the continued volatility in the macro environment, the company is providing only limited sequential financial guidance for the fourth quarter of fiscal 2023. The company’s consolidated net sales for the fourth quarter are expected to be moderately higher as compared to the $52.5 million in net sales for the third quarter of fiscal 2023, driven largely by strong improvement in the mattress fabrics segment and comparable performance in the upholstery fabrics segment. The company expects a consolidated operating loss (loss from operations) for the fourth quarter of fiscal 2023 that is meaningfully lower than the $(7.8) million operating loss for the third quarter of fiscal 2023. The company also expects its cash position as of the end of the fourth quarter of fiscal 2023 to remain comparable to the $14.6 million at the end of fiscal 2022.
  • The company’s expectations 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.

Commenting on the results, Iv Culp, president and chief executive officer of Culp, Inc., said, “As expected, our sales and operating results for the third quarter reflected demand weakness in the domestic mattress and residential home furnishings industries, specifically related to unit volume. Our performance was affected by fewer billing days during the quarter due to our customers taking longer than normal holiday shutdowns in the face of high retail inventories and reduced consumer demand. Sales were also affected by the timing of the Chinese New Year holiday, which this year fell primarily within the third quarter, rather than the fourth quarter.

"Despite the headwinds, we continued our focus on cash preservation and working capital management, including inventory reductions, throughout the quarter. We have generated cash flow from operations of $4.6 million and free cash flow of $2.5 million for the first nine months of the fiscal year, a significant improvement compared to the same period last year, ending the quarter with $16.7 million in cash and no outstanding borrowings. We also completed the closing of a new credit facility that supplements our strong balance sheet by providing enhanced liquidity and flexibility as we navigate the ongoing market volatility.

"We remain focused on the long term and continue to diligently manage the aspects of our business we can control. We are especially pleased with the business transformation plan underway in our mattress fabrics segment, and we expect sustained sequential improvement in this business as we implement management changes and new processes tailored to improve operational efficiencies, optimize our supply chain, and strengthen customer relationships. Additionally, it was encouraging to see the activity level at the January Las Vegas market. The industry has previously been in a cycle of deferring new product introductions, which affects our unit volume, so we were pleased to see many new products and innovations presented at this market featuring CULP mattress fabrics and sewn covers that are launching throughout calendar 2023.

"Based on demand trends and customer sentiment, we began a rationalization and consolidation of our cut and sew upholstery kit platform in Haiti near the end of the quarter. This restructuring, which will be completed during the fourth quarter, realigns our capacity and costs with current demand levels for upholstery kits, while still allowing us to support our customers and scale for additional capacity if conditions improve. We expect annualized savings of approximately $1.5 million from this initiative, and will recoup $2.4 million in prepaid rent expense over the next six and half years.

"Looking ahead, while we expect current macro conditions will affect our business through at least the end of this fiscal year, our market position remains solid, and we continue to gain new product opportunities with customers. We are diligently focused on returning to profitability and taking the necessary steps to withstand the current market challenges, while also engaging in a holistic business improvement strategy that will position us to emerge stronger when conditions normalize,” added Culp.

Segment Update

Mattress Fabrics Segment (“CHF”) Summary

  • Sales for this segment were $24.7 million for the third quarter, down 35.8 percent compared with sales of $38.4 million in the third quarter of fiscal 2022. Sequentially, sales were down 5.8 percent compared with sales of $26.2 million for the second quarter of fiscal 2023.
  • Sales for CHF were pressured during the quarter by reduced demand, with mattress industry analysis reflecting significant unit contraction.
  • Operating performance for the third quarter was primarily pressured by operating inefficiencies driven by lower sales volume and holiday shutdowns across CHF's locations.
  • CHF continued its short-term focus on inventory reduction and cash generation during the quarter, while also engaging in an ongoing business transformation plan focused on long-term improvement in every facet of the business, including quality, sales, marketing, and operational processes; supply chain optimization; employee engagement; and organizational management structure.
  • At the end of the third quarter, CHF began the roll out for some new customer programs, which are priced in-line with current market costs, and expects to benefit as these new programs expand across more sales channels and retail floors, and as additional new product rollouts launch during calendar 2023.
  • The CHF team continues to execute its product driven strategy, with an emphasis on innovation, design creativity, and customer relationships. Management remains diligently focused on controlling costs, and will continue to make operational adjustments to align with demand conditions.

Upholstery Fabrics Segment (“CUF”) Summary

  • Sales for this segment were $27.8 million for the third quarter, down 33.5 percent compared with sales of $41.9 million in the third quarter of fiscal 2022, which was the segment's strongest quarterly sales performance since fiscal 2006. Sequentially, sales were down 13.5 percent compared with sales of $32.2 million for the second quarter of fiscal 2023.
  • Sales for CUF’s residential fabric business remained under pressure during the quarter by reduced demand, driven by high inventory levels for the residential home furnishings industry. This pressure is expected to continue through at least the first quarter of fiscal 2024 as retailers and manufacturers work through their inventory positions.
  • Demand remained solid for CUF’s hospitality business during the third quarter, with sales for the hospitality/contract business accounting for approximately 30 percent of CUF's total sales.
  • Operating performance for the third quarter, as compared to the prior-year period, was pressured primarily by lower residential sales, as well as operating inefficiencies in CUF's cut and sew facility in Haiti and in its Read Window Products business. These pressures were partially offset by a significantly more favorable foreign exchange rate associated with CUF's operations in China, as well as lower costs resulting from the restructuring of CUF's cut and sew platform in China during the prior quarter.
  • CUF began a rationalization and restructuring of its Haiti cut and sew platform near the end of the quarter to align the capacity and cost structure of this operation with reduced demand. This platform adjustment, which includes terminating a lease and relocating into an existing mattress cover facility, will be completed during the fourth quarter.
  • Despite high inventory levels affecting manufacturer demand in the residential home furnishings industry, CUF's business remains well-positioned for the long term with its scalable global platform and innovative product offerings, including its popular portfolio of LiveSmart® performance products and new product technologies.

Balance Sheet and Cash Flow

  • As of January 29, 2023, the company reported $16.7 million in total cash and investments and no outstanding debt. This compares with $14.6 million in total cash and investments and no outstanding debt as of the end of fiscal 2022.
  • Cash flow from operations and free cash flow were $4.6 million and $2.5 million, respectively, for the first nine months of fiscal 2023, compared with cash flow from operations and free cash flow of negative $(12.4) million and negative $(18.5) million, respectively, for the first nine months of fiscal 2022. (See reconciliation table at the back of this press release.)
  • The company’s cash flow from operations and free cash flow during the first nine months of fiscal 2023 were favorably affected by working capital management, namely reductions in inventory. Importantly, since the end of the third quarter of fiscal 2022, inventory reduction has contributed approximately $18.2 million to the company's cash position.
  • Capital expenditures through the third quarter of fiscal 2023 were $1.6 million compared with $5.3 million for the same period for fiscal 2022. The company continues to manage capital investments, focusing on projects that will increase efficiencies and improve quality.
  • The company completed the closing of a new three-year asset-based revolving credit facility of up to $35 million during the third quarter of fiscal 2023. Borrowing availability under this new asset-based revolving facility is based on a calculation using certain of the company's accounts receivable and inventory, determined on a monthly basis, and, as compared to the company's prior credit facility, provides enhanced liquidity and more flexibility with minimal financial covenants.
  • As of January 29, 2023, the company had approximately $40 million in liquidity, consisting of $16.7 million in total cash and investments and approximately $23 million in borrowing availability under the company's new credit facility.

Dividends and Share Repurchases

To preserve liquidity and support future growth opportunities, the company’s Board of Directors suspended the company’s quarterly cash dividend on its common stock in June of 2022.

The company did not repurchase any shares during the third quarter of fiscal 2023, leaving approximately $3.2 million available under the current share repurchase program as of January 29, 2023. Despite the current share repurchase authorization, the company does not expect to repurchase any shares during the fourth quarter of fiscal 2023.

Conference Call

Culp, Inc. will hold a conference call to discuss financial results for the third quarter of fiscal 2023 on March 2, 2023, at 11:00 a.m. Eastern Time. A live webcast of this call can be accessed on the “Upcoming Events” section on the investor relations page of the company’s website, www.culp.com. A replay of the webcast will be available for 30 days under the “Past Events” section on the investor relations page of the company’s website, beginning at 2:00 p.m. Eastern Time on March 2, 2023.

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, projections, or trends for our future operations, strategic initiatives and plans, 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. 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. 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.

CULP, INC.

CONSOLIDATED STATEMENTS OF NET LOSS

FOR THREE MONTHS ENDED JANUARY 29, 2023, AND JANUARY 30, 2022

Unaudited

(Amounts in Thousands, Except for Per Share Data)

 

 

 

 

THREE MONTHS ENDED

 

 

 

Amount

 

 

 

 

 

Percent of Sales

 

 

 

(3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

January 29,

 

 

January 30,

 

 

% Over

 

 

January 29,

 

 

January 30,

 

 

 

2023

 

 

2022

 

 

(Under)

 

 

2023

 

 

2022

 

Net sales

 

$

52,523

 

 

$

80,291

 

 

 

(34.6

)%

 

 

100.0

%

 

 

100.0

%

Cost of sales

 

 

(50,430

)

 

 

(71,181

)

 

 

(29.2

)%

 

 

96.0

%

 

 

88.7

%

Gross profit

 

 

2,093

 

 

 

9,110

 

 

 

(77.0

)%

 

 

4.0

%

 

 

11.3

%

Selling, general and administrative expenses

 

 

(9,165

)

 

 

(8,007

)

 

 

14.5

%

 

 

17.4

%

 

 

10.0

%

Restructuring expense (2)

 

 

(711

)

 

 

 

 

 

100.0

%

 

 

1.4

%

 

 

 

(Loss) income from operations

 

 

(7,783

)

 

 

1,103

 

 

N.M.

 

 

 

(14.8

)%

 

 

1.4

%

Interest income

 

 

196

 

 

 

214

 

 

 

(8.4

)%

 

 

0.4

%

 

 

0.3

%

Other expense

 

 

(1,095

)

 

 

(322

)

 

 

240.1

%

 

 

(2.1

)%

 

 

0.4

%

(Loss) income before income taxes

 

 

(8,682

)

 

 

995

 

 

N.M.

 

 

 

(16.5

)%

 

 

1.2

%

Income tax expense (1)

 

 

(286

)

 

 

(1,284

)

 

 

(77.7

)%

 

 

(3.3

)%

 

 

129.0

%

Net loss

 

$

(8,968

)

 

$

(289

)

 

N.M

 

 

 

(17.1

)%

 

 

(0.4

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share - basic

 

$

(0.73

)

 

$

(0.02

)

 

N.M.

 

 

 

 

 

 

 

Net loss per share - diluted

 

$

(0.73

)

 

$

(0.02

)

 

N.M.

 

 

 

 

 

 

 

Average shares outstanding-basic

 

 

12,299

 

 

 

12,212

 

 

 

0.7

%

 

 

 

 

 

 

Average shares outstanding-diluted

 

 

12,299

 

 

 

12,212

 

 

 

0.7

%

 

 

 

 

 

 

Notes

 

(1)

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

 

(2)

Restructuring expense of $711,000 for the three-months ending January 29, 2023, represents lease termination costs of $434,000 and an impairment loss regarding leasehold improvements totaling $277,000 that related to the consolidation of certain leased facilities located in Ouanaminthe, Haiti.

 

(3)

See page 14 for our Reconciliation of Selected Income Statement Information to Adjusted Results for the three-months ending January 29, 2023.

CULP, INC.

CONSOLIDATED STATEMENTS OF NET (LOSS) INCOME

FOR NINE MONTHS ENDED JANUARY 29, 2023, AND JANUARY 30, 2022

Unaudited

(Amounts in Thousands, Except for Per Share Data)

 

 

 

NINE MONTHS ENDED

 

 

 

Amount

 

 

 

 

 

Percent of Sales

 

 

 

(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

January 29,

 

 

January 30,

 

 

% Over

 

 

January 29,

 

 

January 30,

 

 

 

2023

 

 

2022

 

 

(Under)

 

 

2023

 

 

2022

 

Net sales

 

$

173,508

 

 

$

237,899

 

 

 

(27.1

)%

 

 

100.0

%

 

 

100.0

%

Cost of sales (2)

 

 

(169,500

)

 

 

(205,563

)

 

 

(17.5

)%

 

 

97.7

%

 

 

86.4

%

Gross profit

 

 

4,008

 

 

 

32,336

 

 

 

(87.6

)%

 

 

2.3

%

 

 

13.6

%

Selling, general and administrative expenses

 

 

(27,133

)

 

 

(26,275

)

 

 

3.3

%

 

 

15.6

%

 

 

11.0

%

Restructuring expense (3)

 

 

(1,326

)

 

 

 

 

 

100.0

%

 

 

0.8

%

 

 

 

(Loss) income from operations

 

 

(24,451

)

 

 

6,061

 

 

N.M.

 

 

 

(14.1

)%

 

 

2.5

%

Interest income

 

 

292

 

 

 

347

 

 

 

(15.9

)%

 

 

0.2

%

 

 

0.1

%

Other expense

 

 

(348

)

 

 

(963

)

 

 

(63.9

)%

 

 

0.2

%

 

 

0.4

%

(Loss) income before income taxes

 

 

(24,507

)

 

 

5,445

 

 

N.M.

 

 

 

(14.1

)%

 

 

2.3

%

Income tax expense (1)

 

 

(2,332

)

 

 

(2,633

)

 

 

(11.4

)%

 

 

(9.5

)%

 

 

48.4

%

Net (loss) income

 

$

(26,839

)

 

$

2,812

 

 

N.M.

 

 

 

(15.5

)%

 

 

1.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income per share - basic

 

$

(2.19

)

 

$

0.23

 

 

N.M.

 

 

 

 

 

 

 

Net (loss) income per share - diluted

 

$

(2.19

)

 

$

0.23

 

 

N.M.

 

 

 

 

 

 

 

Average shares outstanding-basic

 

 

12,272

 

 

 

12,249

 

 

 

0.2

%

 

 

 

 

 

 

Average shares outstanding-diluted

 

 

12,272

 

 

 

12,341

 

 

 

(0.6

)%

 

 

 

 

 

 

Notes

 

 

(1)

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

 

 

(2)

Cost of sales for the nine-months ending January 29, 2023, includes restructuring related charges totaling $98,000 which pertained to a loss on disposal and markdowns of inventory related to the exit of our cut and sew upholstery fabrics operation located in Shanghai, China that occurred during the second quarter of fiscal 2023.

 

 

(3)

Restructuring expense of $1.3 million for the nine-months ending January 29, 2023, relates to both our restructuring activities for our cut and sew upholstery fabrics operations located in Shanghai, China, which occurred during the second quarter of fiscal 2023, and located in Ouanaminthe, Haiti, which occurred during the third quarter of fiscal 2023. Restructuring expense consists of lease termination costs of $481,000, employee termination benefits of $468,000, impairment losses totaling $357,000 that relate to leasehold improvements and equipment, and $20,000 for other associated costs.

 

 

(4)

See page 15 for our Reconciliation of Selected Income Statement Information to Adjusted Results for the nine-months ending January 29, 2023.

CONSOLIDATED BALANCE SHEETS

JANUARY 29, 2023, JANUARY 30, 2022, AND MAY 1, 2022

Unaudited

(Amounts in Thousands)

 

 

 

 

 

 

 

 

 

 

 

 

Amounts

 

 

 

 

 

 

 

 

 

 

 

 

(Condensed)

 

 

(Condensed)

 

 

 

 

 

 

 

 

(Condensed)

 

 

 

January 29,

 

 

January 30,

 

 

Increase (Decrease)

 

 

* May 1,

 

 

 

2023

 

 

2022

 

 

Dollars

 

 

Percent

 

 

2022

 

Current assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

16,725

 

 

 

11,780

 

 

 

4,945

 

 

 

42.0

%

 

 

14,550

 

Short-term investments - Held-To-Maturity

 

 

 

 

 

1,315

 

 

 

(1,315

)

 

 

(100.0

)%

 

 

 

Short-term investments - Available for Sale

 

 

 

 

 

438

 

 

 

(438

)

 

 

(100.0

)%

 

 

 

Short-term investments - Rabbi Trust

 

 

2,420

 

 

 

 

 

 

2,420

 

 

 

100.0

%

 

 

 

Accounts receivable

 

 

21,241

 

 

 

38,998

 

 

 

(17,757

)

 

 

(45.5

)%

 

 

22,226

 

Inventories

 

 

47,627

 

 

 

73,133

 

 

 

(25,506

)

 

 

(34.9

)%

 

 

66,557

 

Assets held for sale

 

 

1,950

 

 

 

 

 

 

1,950

 

 

 

100.0

%

 

 

 

Current income taxes receivable

 

 

238

 

 

 

367

 

 

 

(129

)

 

 

(35.1

)%

 

 

857

 

Other current assets

 

 

2,839

 

 

 

4,419

 

 

 

(1,580

)

 

 

(35.8

)%

 

 

2,986

 

Total current assets

 

 

93,040

 

 

 

130,450

 

 

 

(37,410

)

 

 

(28.7

)%

 

 

107,176

 

Property, plant & equipment, net

 

 

37,192

 

 

 

42,778

 

 

 

(5,586

)

 

 

(13.1

)%

 

 

41,702

 

Right of use assets

 

 

8,913

 

 

 

16,595

 

 

 

(7,682

)

 

 

(46.3

)%

 

 

15,577

 

Intangible assets

 

 

2,346

 

 

 

2,722

 

 

 

(376

)

 

 

(13.8

)%

 

 

2,628

 

Long-term investments - Rabbi Trust

 

 

7,725

 

 

 

9,223

 

 

 

(1,498

)

 

 

(16.2

)%

 

 

9,357

 

Long-term investments - Held-To-Maturity

 

 

 

 

 

8,677

 

 

 

(8,677

)

 

 

(100.0

)%

 

 

 

Deferred income taxes

 

 

463

 

 

 

500

 

 

 

(37

)

 

 

(7.4

)%

 

 

528

 

Other assets

 

 

919

 

 

 

622

 

 

 

297

 

 

 

47.7

%

 

 

595

 

Total assets

 

$

150,598

 

 

 

211,567

 

 

 

(60,969

)

 

 

(28.8

)%

 

 

177,563

 

Current liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable - trade

 

 

22,540

 

 

 

46,690

 

 

 

(24,150

)

 

 

(51.7

)%

 

 

20,099

 

Accounts payable - capital expenditures

 

 

25

 

 

 

33

 

 

 

(8

)

 

 

(24.2

)%

 

 

473

 

Operating lease liability - current

 

 

2,785

 

 

 

3,295

 

 

 

(510

)

 

 

(15.5

)%

 

 

3,219

 

Deferred compensation

 

 

2,420

 

 

 

 

 

 

2,420

 

 

 

100.0

%

 

 

 

Deferred revenue

 

 

1,430

 

 

 

518

 

 

 

912

 

 

 

176.1

%

 

 

520

 

Accrued expenses

 

 

6,701

 

 

 

8,446

 

 

 

(1,745

)

 

 

(20.7

)%

 

 

7,832

 

Income taxes payable - current

 

 

467

 

 

 

240

 

 

 

227

 

 

 

94.6

%

 

 

413

 

Total current liabilities

 

 

36,368

 

 

 

59,222

 

 

 

(22,854

)

 

 

(38.6

)%

 

 

32,556

 

Operating lease liability - long-term

 

 

4,399

 

 

 

7,848

 

 

 

(3,449

)

 

 

(43.9

)%

 

 

7,062

 

Income taxes payable - long-term

 

 

2,648

 

 

 

3,099

 

 

 

(451

)

 

 

(14.6

)%

 

 

3,097

 

Deferred income taxes

 

 

6,089

 

 

 

5,484

 

 

 

605

 

 

 

11.0

%

 

 

6,004

 

Deferred compensation

 

 

7,590

 

 

 

9,180

 

 

 

(1,590

)

 

 

(17.3

)%

 

 

9,343

 

Total liabilities

 

 

57,094

 

 

 

84,833

 

 

 

(27,739

)

 

 

(32.7

)%

 

 

58,062

 

Shareholders' equity

 

 

93,504

 

 

 

126,734

 

 

 

(33,230

)

 

 

(26.2

)%

 

 

119,501

 

Total liabilities and shareholders' equity

 

$

150,598

 

 

 

211,567

 

 

 

(60,969

)

 

 

(28.8

)%

 

 

177,563

 

Shares outstanding

 

 

12,312

 

 

 

12,218

 

 

 

94

 

 

 

0.8

%

 

 

12,229

 

* Derived from audited financial statements.

CULP, INC.

SUMMARY OF CASH AND INVESTMENTS

JANUARY 29, 2023, JANUARY 30, 2022, AND MAY 1, 2022

Unaudited

(Amounts in Thousands)

 

 

 

Amounts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

January 29,

 

 

January 30,

 

 

May 1,

 

 

 

2023

 

 

2022

 

 

2022*

 

Cash and Investments

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

16,725

 

 

$

11,780

 

 

$

14,550

 

Short-term investments - Available for Sale

 

 

 

 

 

438

 

 

 

 

Short-term investments - Held-To-Maturity

 

 

 

 

 

1,315

 

 

 

 

Long-term investments - Held-To-Maturity

 

 

 

 

 

8,677

 

 

 

 

Total Cash and Investments

 

$

16,725

 

 

$

22,210

 

 

$

14,550

 

 

 

 

 

 

 

 

 

 

 

* Derived from audited financial statements.

CULP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED JANUARY 29, 2023, AND JANUARY 30, 2022

Unaudited

(Amounts in Thousands)

 

 

 

NINE MONTHS ENDED

 

 

 

Amounts

 

 

 

January 29,

 

 

January 30,

 

 

 

2023

 

 

2022

 

Cash flows from operating activities:

 

 

 

 

 

 

Net (loss) income

 

$

(26,839

)

 

$

2,812

 

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

 

 

 

 

 

 

Depreciation

 

 

5,228

 

 

 

5,203

 

Non-cash inventory charges (2) (3)

 

 

6,301

 

 

 

1,407

 

Amortization

 

 

323

 

 

 

417

 

Stock-based compensation

 

 

887

 

 

 

880

 

Deferred income taxes

 

 

150

 

 

 

199

 

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

 

 

 

 

 

28

 

Gain on sale of equipment

 

 

(312

)

 

 

 

Non-cash restructuring expense

 

 

791

 

 

 

 

Foreign currency exchange (gain) loss

 

 

(362

)

 

 

240

 

Changes in assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

954

 

 

 

(1,228

)

Inventories

 

 

12,477

 

 

 

(18,453

)

Other current assets

 

 

(39

)

 

 

(571

)

Other assets

 

 

(76

)

 

 

(1,404

)

Accounts payable

 

 

3,051

 

 

 

3,865

 

Deferred revenue

 

 

910

 

 

 

(22

)

Accrued expenses and deferred compensation

 

 

885

 

 

 

(5,130

)

Income taxes

 

 

254

 

 

 

(612

)

Net cash provided by (used in) operating activities

 

 

4,583

 

 

 

(12,369

)

Cash flows from investing activities:

 

 

 

 

 

 

Capital expenditures

 

 

(1,602

)

 

 

(5,288

)

Proceeds from the sale of equipment

 

 

465

 

 

 

 

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

 

 

 

 

 

3,953

 

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

 

 

 

 

 

(9,751

)

Purchase of short-term investments (Available for Sale)

 

 

 

 

 

(4,392

)

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

 

 

 

 

 

9,442

 

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

 

 

70

 

 

 

33

 

Purchase of long-term investments (rabbi trust)

 

 

(870

)

 

 

(873

)

Net cash used in investing activities

 

 

(1,937

)

 

 

(6,876

)

Cash flows from financing activities:

 

 

 

 

 

 

Payments associated with lines of credit

 

 

 

 

 

(3,000

)

Proceeds associated with lines of credit

 

 

 

 

 

3,000

 

Dividends paid

 

 

 

 

 

(4,104

)

Common stock repurchased

 

 

 

 

 

(1,752

)

Common stock surrendered for withholding taxes payable

 

 

(33

)

 

 

(50

)

Payments of debt issuance costs

 

 

(289

)

 

 

(110

)

Net cash used in financing activities

 

 

(322

)

 

 

(6,016

)

Effect of exchange rate changes on cash and cash equivalents

 

 

(149

)

 

 

32

 

Increase (decrease) in cash and cash equivalents

 

 

2,175

 

 

 

(25,229

)

Cash and cash equivalents at beginning of year

 

 

14,550

 

 

 

37,009

 

Cash and cash equivalents at end of period

 

$

16,725

 

 

$

11,780

 

Free Cash Flow (1)

 

$

2,497

 

 

$

(18,465

)

(1)

See next page for Reconciliation of Free Cash Flow for the nine-month periods ending January 29, 2023, and January 30, 2022, respectively.

 

 

(2)

The non-cash inventory charge of $6.3 million for the nine-months ending January 29, 2023, represents a $2.9 million impairment charge associated with our mattress fabrics segment, $3.3 million related to markdowns of inventory estimated based on our policy for aged inventory, and $98,000 for the loss on disposal and markdowns of inventory related to the exit of our cut and sew upholstery fabrics operation located in Shanghai, China.

 

 

(3)

The non-cash inventory charge of $1.4 million for the nine-months ending January 30, 2022, represents markdowns of inventory estimated based on our policy for aged inventory.

Reconciliation of Free Cash Flow:

 

 

FY 2023

 

 

FY 2022

 

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

 

$

4,583

 

 

$

(12,369

)

B) Minus: Capital Expenditures

 

 

(1,602

)

 

 

(5,288

)

C) Plus: Proceeds from the sale of equipment

 

 

465

 

 

 

 

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

 

 

70

 

 

 

33

 

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

 

 

(870

)

 

 

(873

)

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

 

 

(149

)

 

 

32

 

Free Cash Flow

 

$

2,497

 

 

$

(18,465

)

CULP, INC.

STATEMENTS OF OPERATIONS BY SEGMENT

FOR THE THREE MONTHS ENDED JANUARY 29, 2023, AND JANUARY 30, 2022

Unaudited

(Amounts in Thousands)

 

 

 

THREE MONTHS ENDED

 

 

 

Amounts

 

 

 

 

 

Percent of Total Sales

 

 

 

January 29,

 

 

January 30,

 

 

% Over

 

 

January 29,

 

 

January 30,

 

Net Sales by Segment

 

2023

 

 

2022

 

 

(Under)

 

 

2023

 

 

2022

 

Mattress Fabrics

 

$

24,697

 

 

$

38,439

 

 

 

(35.8

)%

 

 

47.0

%

 

 

47.9

%

Upholstery Fabrics

 

 

27,826

 

 

 

41,852

 

 

 

(33.5

)%

 

 

53.0

%

 

 

52.1

%

Net Sales

 

$

52,523

 

 

$

80,291

 

 

 

(34.6

)%

 

 

100.0

%

 

 

100.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross (Loss) Profit

 

 

 

 

 

 

 

 

 

 

Gross Margin

 

Mattress Fabrics

 

$

(1,237

)

 

$

3,164

 

 

 

(139.1

)%

 

 

(5.0

)%

 

 

8.2

%

Upholstery Fabrics

 

 

3,330

 

 

 

5,946

 

 

 

(44.0

)%

 

 

12.0

%

 

 

14.2

%

Gross Profit

 

$

2,093

 

 

$

9,110

 

 

 

(77.0

)%

 

 

4.0

%

 

 

11.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, General and Administrative Expenses by Segment

 

 

 

 

 

 

 

 

 

 

Percent of Sales

 

Mattress Fabrics

 

$

2,992

 

 

$

2,800

 

 

 

6.9

%

 

 

12.1

%

 

 

7.3

%

Upholstery Fabrics

 

 

3,750

 

 

 

3,500

 

 

 

7.1

%

 

 

13.5

%

 

 

8.4

%

Unallocated Corporate expenses

 

 

2,423

 

 

 

1,707

 

 

 

41.9

%

 

 

4.6

%

 

 

2.1

%

Selling, General and Administrative Expenses

 

$

9,165

 

 

$

8,007

 

 

 

14.5

%

 

 

17.4

%

 

 

10.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) Income from Operations by Segment

 

 

 

 

 

 

 

 

 

 

Operating Margin

 

Mattress Fabrics

 

$

(4,229

)

 

$

364

 

 

N.M.

 

 

 

(17.1

)%

 

 

0.9

%

Upholstery Fabrics

 

 

(420

)

 

 

2,446

 

 

N.M.

 

 

 

(1.5

)%

 

 

5.8

%

Unallocated corporate expenses

 

 

(2,423

)

 

 

(1,707

)

 

 

41.9

%

 

 

(4.6

)%

 

 

(2.1

)%

Total Segment (Loss) Income from Operations

 

 

(7,072

)

 

 

1,103

 

 

N.M.

 

 

 

(13.5

)%

 

 

1.4

%

Restructuring Expense (1)

 

 

(711

)

 

 

 

 

 

100.0

%

 

 

(1.4

)%

 

 

 

(Loss) Income from Operations

 

$

(7,783

)

 

$

1,103

 

 

N.M.

 

 

 

(14.8

)%

 

 

1.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation Expense by Segment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mattress Fabrics

 

$

1,536

 

 

$

1,542

 

 

 

(0.4

)%

 

 

 

 

 

 

Upholstery Fabrics

 

 

203

 

 

 

190

 

 

 

6.8

%

 

 

 

 

 

 

Depreciation Expense

 

$

1,739

 

 

$

1,732

 

 

 

0.4

%

 

 

 

 

 

 

Notes
 

(1)

See page 14 for our Reconciliation of Selected Income Statement Information to Adjusted Results for the three-months ending January 29, 2023.

CULP, INC.

STATEMENTS OF OPERATIONS BY SEGMENT

FOR THE NINE MONTHS ENDED JANUARY 29, 2023, AND JANUARY 30, 2022

Unaudited

(Amounts in Thousands)

 

 

 

NINE MONTHS ENDED

 

 

 

Amounts

 

 

 

 

 

Percent of Total Sales

 

 

 

January 29,

 

 

January 30,

 

 

% Over

 

 

January 29,

 

 

January 30,

 

Net Sales by Segment

 

2023

 

 

2022

 

 

(Under)

 

 

2023

 

 

2022

 

Mattress Fabrics

 

$

80,299

 

 

$

122,380

 

 

 

(34.4

)%

 

 

46.3

%

 

 

51.4

%

Upholstery Fabrics

 

 

93,209

 

 

 

115,519

 

 

 

(19.3

)%

 

 

53.7

%

 

 

48.6

%

Net Sales

 

$

173,508

 

 

$

237,899

 

 

 

(27.1

)%

 

 

100.0

%

 

 

100.0

%

Gross (Loss) Profit

 

 

 

 

 

 

 

 

 

 

Gross Profit Margin

 

Mattress Fabrics

 

$

(7,330

)

 

$

16,106

 

 

 

(145.5

)%

 

 

(9.1

)%

 

 

13.2

%

Upholstery Fabrics

 

 

11,436

 

 

 

16,230

 

 

 

(29.5

)%

 

 

12.3

%

 

 

14.0

%

Total Segment Gross Profit

 

 

4,106

 

 

 

32,336

 

 

 

(87.3

)%

 

 

2.4

%

 

 

13.6

%

Restructuring Related Charge (3)

 

 

(98

)

 

 

 

 

 

100.0

%

 

 

(0.1

)%

 

 

 

Gross Profit

 

$

4,008

 

 

$

32,336

 

 

 

(87.6

)%

 

 

2.3

%

 

 

13.6

%

Selling, General and Administrative Expenses by Segment

 

 

 

 

 

 

 

 

 

 

Percent of Sales

 

Mattress Fabrics

 

$

8,821

 

 

$

8,991

 

 

 

(1.9

)%

 

 

11.0

%

 

 

7.3

%

Upholstery Fabrics

 

 

11,053

 

 

 

10,491

 

 

 

5.4

%

 

 

11.9

%

 

 

9.1

%

Unallocated Corporate expenses

 

 

7,259

 

 

 

6,793

 

 

 

6.9

%

 

 

4.2

%

 

 

2.9

%

Selling, General and Administrative Expenses

 

$

27,133

 

 

$

26,275

 

 

 

3.3

%

 

 

15.6

%

 

 

11.0

%

(Loss) Income from Operations by Segment

 

 

 

 

 

 

 

 

 

 

Operating Margin

 

Mattress Fabrics

 

$

(16,151

)

 

$

7,115

 

 

N.M.

 

 

 

(20.1

)%

 

 

5.8

%

Upholstery Fabrics

 

 

383

 

 

 

5,739

 

 

 

(93.3

)%

 

 

0.4

%

 

 

5.0

%

Unallocated corporate expenses

 

 

(7,259

)

 

 

(6,793

)

 

 

6.9

%

 

 

(4.2

)%

 

 

(2.9

)%

Total Segment (Loss) Income from Operations

 

 

(23,027

)

 

 

6,061

 

 

N.M.

 

 

 

(13.3

)%

 

 

2.5

%

Restructuring Expense (3)

 

 

(1,326

)

 

 

 

 

 

100.0

%

 

 

(0.8

)%

 

 

 

Restructuring Related Charge (3)

 

 

(98

)

 

 

 

 

 

100.0

%

 

 

(0.1

)%

 

 

 

(Loss) Income from Operations

 

$

(24,451

)

 

 

6,061

 

 

N.M.

 

 

 

(14.1

)%

 

 

2.5

%

Return on Capital (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mattress Fabrics

 

 

(24.8

)%

 

 

12.1

%

 

 

(305.0

)%

 

 

 

 

 

 

Upholstery Fabrics

 

 

1.3

%

 

 

49.7

%

 

 

(97.4

)%

 

 

 

 

 

 

Unallocated Corporate

 

N.M.

 

 

N.M.

 

 

N.M.

 

 

 

 

 

 

 

Consolidated

 

 

(28.1

)%

 

 

8.0

%

 

 

(451.3

)%

 

 

 

 

 

 

Capital Employed (1) (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mattress Fabrics

 

$

65,882

 

 

$

86,830

 

 

 

(24.1

)%

 

 

 

 

 

 

Upholstery Fabrics

 

 

15,450

 

 

 

21,676

 

 

 

(28.7

)%

 

 

 

 

 

 

Unallocated Corporate

 

 

3,815

 

 

 

3,931

 

 

 

(3.0

)%

 

 

 

 

 

 

Consolidated

 

$

85,147

 

 

$

112,437

 

 

 

(24.3

)%

 

 

 

 

 

 

Depreciation Expense by Segment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mattress Fabrics

 

$

4,624

 

 

$

4,613

 

 

 

0.2

%

 

 

 

 

 

 

Upholstery Fabrics

 

 

604

 

 

 

590

 

 

 

2.4

%

 

 

 

 

 

 

Depreciation Expense

 

$

5,228

 

 

$

5,203

 

 

 

0.5

%

 

 

 

 

 

 

Notes

 

 

(1)

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

 

 

(2)

The capital employed balances are as of January 29, 2023, and January 30, 2022, respectively.

 

 

(3)

See page 15 for our Reconciliation of Selected Income Statement Information to Adjusted Results for the nine-months ending January 29, 2023.

CULP, INC.

RECONCILIATION OF SELECTED INCOME STATEMENT INFORMATION TO ADJUSTED RESULTS

FOR THREE MONTHS ENDED JANUARY 29, 2023

Unaudited

(Amounts in Thousands)

 

 

 

 

 

 

 

 

 

 

As Reported

 

 

 

 

 

January 29, 2023

 

 

 

January 29,

 

 

 

 

 

Adjusted

 

 

 

2023

 

 

Adjustments

 

 

Results

 

Net sales

 

$

52,523

 

 

 

 

 

$

52,523

 

Cost of sales

 

 

(50,430

)

 

 

 

 

 

(50,430

)

Gross profit

 

 

2,093

 

 

 

 

 

 

2,093

 

Selling, general and administrative expenses

 

 

(9,165

)

 

 

 

 

 

(9,165

)

Restructuring expense (1)

 

 

(711

)

 

711

 

 

 

 

Loss from operations

 

$

(7,783

)

 

 

711

 

 

$

(7,072

)

Notes

 

 

(1)

Restructuring expense of $711,000 for the three-months ending January 29, 2023, represents lease termination costs of $434,000 and an impairment loss regarding leasehold improvements totaling $277,000 that related to the consolidation of certain leased facilities located in Ouanaminthe, Haiti.

 

CULP, INC.

RECONCILIATION OF SELECTED INCOME STATEMENT INFORMATION TO ADJUSTED RESULTS

FOR NINE MONTHS ENDED JANUARY 29, 2023

Unaudited

(Amounts in Thousands)

 

 

 

As Reported

 

 

 

 

 

January 29, 2023

 

 

 

January 29,

 

 

 

 

 

Adjusted

 

 

 

2023

 

 

Adjustments

 

 

Results

 

Net sales

 

$

173,508

 

 

 

 

 

$

173,508

 

Cost of sales (1)

 

 

(169,500

)

 

98

 

 

 

(169,402

)

Gross profit

 

 

4,008

 

 

 

98

 

 

 

4,106

 

Selling, general and administrative expenses

 

 

(27,133

)

 

 

 

 

 

(27,133

)

Restructuring expense (2)

 

 

(1,326

)

 

 

1,326

 

 

 

 

Loss from operations

 

$

(24,451

)

 

 

1,424

 

 

$

(23,027

)

Notes
 

(1)

Cost of sales for the nine-months ending January 29, 2023, includes restructuring related charges totaling $98,000 which pertained to a loss on disposal and markdowns of inventory related to the exit of our cut and sew upholstery fabrics operation located in Shanghai, China that occurred during the second quarter of fiscal 2023.

 

 

(2)

Restructuring expense of $1.3 million for the nine-months ending January 29, 2023, relates to both our restructuring activities for our cut and sew upholstery fabrics operations located in Shanghai, China, which occurred during the second quarter of fiscal 2023, and located in Ouanaminthe, Haiti, which occurred during the third quarter of fiscal 2023. Restructuring expense consists of lease termination costs of $481,000, employee termination benefits of $468,000, impairment losses totaling $357,000 that relate to leasehold improvements and equipment, and $20,000 for other associated costs.

CULP, INC.

CONSOLIDATED STATEMENTS OF ADJUSTED EBITDA

FOR THE TWELVE MONTHS ENDED JANUARY 29, 2023, AND JANUARY 30, 2022

Unaudited

(Amounts in Thousands)

 

 

 

Quarter

Ended

 

 

Quarter

Ended

 

 

Quarter

Ended

 

 

Quarter

Ended

 

 

Trailing

12 Months

 

 

 

May 1,

 

 

July 31,

 

 

October 30,

 

 

January 29,

 

 

January 29,

 

 

 

2022

 

 

2022

 

 

2022

 

 

2023

 

 

2023

 

Net loss (1)

 

$

(6,023

)

 

$

(5,699

)

 

$

(12,173

)

 

$

(8,968

)

 

$

(32,863

)

Income tax expense

 

 

253

 

 

 

896

 

 

 

1,150

 

 

 

286

 

 

 

2,585

 

Interest income, net

 

 

(26

)

 

 

(17

)

 

 

(79

)

 

 

(196

)

 

 

(318

)

Depreciation expense

 

 

1,791

 

 

 

1,770

 

 

 

1,719

 

 

 

1,739

 

 

 

7,019

 

Restructuring expense

 

 

 

 

 

 

 

 

615

 

 

 

711

 

 

 

1,326

 

Restructuring related charge

 

 

 

 

 

 

 

 

98

 

 

 

 

 

 

98

 

Amortization expense

 

 

142

 

 

 

105

 

 

 

109

 

 

 

109

 

 

 

465

 

Stock based compensation

 

 

253

 

 

 

252

 

 

 

313

 

 

 

322

 

 

 

1,140

 

Adjusted EBITDA (1)

 

$

(3,610

)

 

$

(2,693

)

 

$

(8,248

)

 

$

(5,997

)

 

$

(20,548

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

% Net Sales

 

 

(6.3

)%

 

 

(4.3

)%

 

 

(14.1

)%

 

 

(11.4

)%

 

 

(8.9

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter

Ended

 

 

Quarter

Ended

 

 

Quarter

Ended

 

 

Quarter

Ended

 

 

Trailing

12 Months

 

 

 

May 2,

 

 

August 1,

 

 

October 31,

 

 

January 30,

 

 

January 30,

 

 

 

2021

 

 

2021

 

 

2021

 

 

2022

 

 

2022

 

Net income (loss)

 

$

1,485

 

 

$

2,250

 

 

$

851

 

 

$

(289

)

 

$

4,297

 

Income tax expense

 

 

857

 

 

 

905

 

 

 

444

 

 

 

1,284

 

 

 

3,490

 

Interest income, net

 

 

(36

)

 

 

(74

)

 

 

(59

)

 

 

(214

)

 

 

(383

)

Gain on bargain purchase

 

 

(819

)

 

 

 

 

 

 

 

 

 

 

 

(819

)

Depreciation expense

 

 

1,643

 

 

 

1,726

 

 

 

1,745

 

 

 

1,732

 

 

 

6,846

 

Amortization expense

 

 

116

 

 

 

121

 

 

 

146

 

 

 

150

 

 

 

533

 

Stock based compensation

 

 

485

 

 

 

274

 

 

 

435

 

 

 

171

 

 

 

1,365

 

Adjusted EBITDA

 

$

3,731

 

 

$

5,202

 

 

$

3,562

 

 

$

2,834

 

 

$

15,329

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

% Net Sales

 

 

4.7

%

 

 

6.3

%

 

 

4.8

%

 

 

3.5

%

 

 

4.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

% Over (Under)

 

 

(196.8

)%

 

 

(151.8

)%

 

 

(331.6

)%

 

 

(311.6

)%

 

 

(234.0

)%

(1)

Net loss and Adjusted EBITDA for the quarter ended October 30, 2022, and the trailing twelve month periods includes a non-cash charge totaling $5.2 million, which represents a $2.9 million impairment charge associated with our mattress fabrics segment and $2.3 million related to markdowns of inventory estimated based on our policy for aged inventory.

CULP, INC.

RETURN ON CAPITAL EMPLOYED BY SEGMENT

FOR THE TWELVE MONTHS ENDED JANUARY 29, 2023

Unaudited

(Amounts in Thousands)

 

 

Adjusted Operating

(Loss) Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Twelve Months

Ended

 

Average

Capital

 

Return on

Avg. Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

January 29, 2023 (1)

 

Employed (3)

 

Employed (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mattress Fabrics

$

(19,053

)

$

76,826

 

 

(24.8

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Upholstery Fabrics

 

268

 

 

20,290

 

 

1.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unallocated Corporate

 

(9,626

)

 

3,955

 

N.M.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

$

(28,411

)

$

101,072

 

 

(28.1

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Capital Employed

As of the three Months Ended January 29, 2023

 

 

As of the three Months Ended October 30, 2022

 

 

As of the three Months Ended July 31, 2022

 

 

Mattress

 

Upholstery

 

Unallocated

 

 

 

 

Mattress

 

Upholstery

 

Unallocated

 

 

 

 

Mattress

 

Upholstery

 

Unallocated

 

 

 

 

Fabrics

 

Fabrics

 

Corporate

 

Total

 

 

Fabrics

 

Fabrics

 

Corporate

 

Total

 

 

Fabrics

 

Fabrics

 

Corporate

 

Total

 

Total assets (4)

$

75,393

 

 

39,817

 

 

35,388

 

 

150,598

 

 

$

78,366

 

 

44,934

 

 

38,330

 

 

161,630

 

 

$

90,842

 

 

51,053

 

 

38,595

 

 

180,490

 

Total liabilities

 

(9,511

)

 

(24,367

)

 

(23,216

)

 

(57,094

)

 

 

(9,895

)

 

(26,108

)

 

(23,519

)

 

(59,522

)

 

 

(11,934

)

 

(30,762

)

 

(23,799

)

 

(66,495

)

Subtotal

$

65,882

 

$

15,450

 

$

12,172

 

$

93,504

 

 

$

68,471

 

$

18,826

 

$

14,811

 

$

102,108

 

 

$

78,908

 

$

20,291

 

$

14,796

 

$

113,995

 

Cash and cash equivalents

 

 

 

 

 

(16,725

)

 

(16,725

)

 

 

 

 

 

 

(19,137

)

 

(19,137

)

 

 

 

 

 

 

(18,874

)

 

(18,874

)

Short-term investments - Available-For-Sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Short-term investments - Held-To-Maturity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Short-term investments - Rabbi Trust

 

 

 

 

 

(2,420

)

 

(2,420

)

 

 

 

 

 

 

(2,237

)

 

(2,237

)

 

 

 

 

 

 

 

 

 

Current income taxes receivable

 

 

 

 

 

(238

)

 

(238

)

 

 

 

 

 

 

(510

)

 

(510

)

 

 

 

 

 

 

(798

)

 

(798

)

Long-term investments - Held-To-Maturity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term investments - Rabbi Trust

 

 

 

 

 

(7,725

)

 

(7,725

)

 

 

 

 

 

 

(7,526

)

 

(7,526

)

 

 

 

 

 

 

(9,567

)

 

(9,567

)

Deferred income taxes - non-current

 

 

 

 

 

(463

)

 

(463

)

 

 

 

 

 

 

(493

)

 

(493

)

 

 

 

 

 

 

(546

)

 

(546

)

Deferred compensation - current

 

 

 

 

 

2,420

 

 

2,420

 

 

 

 

 

 

 

2,237

 

 

2,237

 

 

 

 

 

 

 

 

 

 

Accrued restructuring

 

 

 

 

 

-

 

 

 

 

 

 

 

 

 

33

 

 

33

 

 

 

 

 

 

 

 

 

 

Income taxes payable - current

 

 

 

 

 

467

 

 

467

 

 

 

 

 

 

 

969

 

 

969

 

 

 

 

 

 

 

587

 

 

587

 

Income taxes payable - long-term

 

 

 

 

 

2,648

 

 

2,648

 

 

 

 

 

 

 

2,629

 

 

2,629

 

 

 

 

 

 

 

3,118

 

 

3,118

 

Deferred income taxes - non-current

 

 

 

 

 

6,089

 

 

6,089

 

 

 

 

 

 

 

5,700

 

 

5,700

 

 

 

 

 

 

 

6,007

 

 

6,007

 

Deferred compensation non-current

 

 

 

 

 

7,590

 

 

7,590

 

 

 

 

 

 

 

7,486

 

 

7,486

 

 

 

 

 

 

 

9,528

 

 

9,528

 

Total Capital Employed

$

65,882

 

$

15,450

 

$

3,815

 

$

85,147

 

 

$

68,471

 

$

18,826

 

$

3,962

 

$

91,259

 

 

$

78,908

 

$

20,291

 

$

4,251

 

$

103,450

 

CULP, INC.

RETURN ON CAPITAL EMPLOYED BY SEGMENT - CONTINUED

FOR THE TWELVE MONTHS ENDED JANUARY 29, 2023

Unaudited

(Amounts in Thousands)

 

 

As of the three Months Ended May 1, 2022

 

 

As of the three Months Ended January 30, 2022

 

 

Mattress

 

Upholstery

 

Unallocated

 

 

 

 

Mattress

 

Upholstery

 

Unallocated

 

 

 

 

Fabrics

 

Fabrics

 

Corporate

 

Total

 

 

Fabrics

 

Fabrics

 

Corporate

 

Total

 

Total assets (4)

$

92,609

 

 

51,124

 

 

33,830

 

 

177,563

 

 

$

103,370

 

 

67,272

 

 

40,925

 

 

211,567

 

Total liabilities

 

(8,569

)

 

(25,915

)

 

(23,578

)

 

(58,062

)

 

 

(16,540

)

 

(45,596

)

 

(22,697

)

 

(84,833

)

Subtotal

$

84,040

 

$

25,209

 

$

10,252

 

$

119,501

 

 

$

86,830

 

$

21,676

 

$

18,228

 

$

126,734

 

Cash and cash equivalents

 

 

 

 

 

(14,550

)

 

(14,550

)

 

 

 

 

 

 

(11,780

)

 

(11,780

)

Short-term investments - Available-For-Sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(438

)

 

(438

)

Short-term investments - Held-To-Maturity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,315

)

 

(1,315

)

Current income taxes receivable

 

 

 

 

 

(857

)

 

(857

)

 

 

 

 

 

 

(367

)

 

(367

)

Long-term investments - Held-To-Maturity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,677

)

 

(8,677

)

Long-term investments - Rabbi Trust

 

 

 

 

 

(9,357

)

 

(9,357

)

 

 

 

 

 

 

(9,223

)

 

(9,223

)

Deferred income taxes - non-current

 

 

 

 

 

(528

)

 

(528

)

 

 

 

 

 

 

(500

)

 

(500

)

Income taxes payable - current

 

 

 

 

 

413

 

 

413

 

 

 

 

 

 

 

240

 

 

240

 

Income taxes payable - long-term

 

 

 

 

 

3,097

 

 

3,097

 

 

 

 

 

 

 

3,099

 

 

3,099

 

Deferred income taxes - non-current

 

 

 

 

 

6,004

 

 

6,004

 

 

 

 

 

 

 

5,484

 

 

5,484

 

Deferred compensation

 

 

 

 

 

9,343

 

 

9,343

 

 

 

 

 

 

 

9,180

 

 

9,180

 

Total Capital Employed

$

84,040

 

$

25,209

 

$

3,817

 

$

113,066

 

 

$

86,830

 

$

21,676

 

$

3,931

 

$

112,437

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mattress

 

Upholstery

 

Unallocated

 

 

 

 

 

 

 

 

 

 

 

 

 

Fabrics

 

Fabrics

 

Corporate

 

Total

 

 

 

 

 

 

 

 

 

 

Average Capital Employed (3)

$

76,826

 

$

20,290

 

$

3,955

 

$

101,072

 

 

 

 

 

 

 

 

 

 

Notes

 

 

(1)

See last page of this presentation for calculation.

 

 

(2)

Return on average capital employed represents the last twelve months operating (loss) income as of January 29, 2023, divided by average capital employed. Average capital employed does not include cash and cash equivalents, short-term investments Available-For-Sale, short-term and long-term investments Held-To-Maturity, short-term and long-term investments – Rabbi Trust, accrued restructuring, income taxes receivable and payable, noncurrent deferred income tax assets and liabilities, and current and non-current deferred compensation.

 

 

(3)

Average capital employed was computed using the five quarterly periods ending January 29, 2023, October 30, 2022, July 31, 2022, May 1, 2022, and January 30, 2022.

 

 

(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 JANUARY 30, 2022

Unaudited

(Amounts in Thousands)

 

 

Adjusted Operating

Income (Loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Twelve Months

Ended

 

Average

Capital

 

Return on

Avg. Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

January 30, 2022 (1)

 

Employed (3)

 

Employed (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mattress Fabrics

$

9,388

 

$

77,348

 

 

12.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Upholstery Fabrics

 

8,354

 

 

16,818

 

 

49.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unallocated Corporate

 

(10,042

)

 

2,069

 

N.M.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

$

7,700

 

$

96,235

 

 

8.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Capital Employed

As of the three Months Ended January 30, 2022

 

 

As of the three Months Ended October 31, 2021

 

 

As of the three Months Ended August 1, 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)

$

103,370

 

 

67,272

 

 

40,925

 

 

211,567

 

 

$

97,390

 

 

55,862

 

 

56,073

 

 

209,325

 

 

$

96,846

 

 

55,187

 

 

60,215

 

 

212,248

 

Total liabilities

 

(16,540

)

 

(45,596

)

 

(22,697

)

 

(84,833

)

 

 

(18,818

)

 

(38,560

)

 

(23,493

)

 

(80,871

)

 

 

(21,298

)

 

(39,983

)

 

(21,418

)

 

(82,699

)

Subtotal

$

86,830

 

$

21,676

 

$

18,228

 

$

126,734

 

 

$

78,572

 

$

17,302

 

$

32,580

 

$

128,454

 

 

$

75,548

 

$

15,204

 

$

38,797

 

$

129,549

 

Cash and cash equivalents

 

 

 

 

 

(11,780

)

 

(11,780

)

 

 

 

 

 

 

(16,956

)

 

(16,956

)

 

 

 

 

 

 

(26,061

)

 

(26,061

)

Short-term investments - Available-For-Sale

 

 

 

 

 

(438

)

 

(438

)

 

 

 

 

 

 

(9,709

)

 

(9,709

)

 

 

 

 

 

 

(9,698

)

 

(9,698

)

Short-term investments - Held-To-Maturity

 

 

 

 

 

(1,315

)

 

(1,315

)

 

 

 

 

 

 

(1,564

)

 

(1,564

)

 

 

 

 

 

 

(1,661

)

 

(1,661

)

Current income taxes receivable

 

 

 

 

 

(367

)

 

(367

)

 

 

 

 

 

 

(613

)

 

(613

)

 

 

 

 

 

 

(524

)

 

(524

)

Long-term investments - Held-To-Maturity

 

 

 

 

 

(8,677

)

 

(8,677

)

 

 

 

 

 

 

(8,353

)

 

(8,353

)

 

 

 

 

 

 

(6,629

)

 

(6,629

)

Long-term investments - Rabbi Trust

 

 

 

 

 

(9,223

)

 

(9,223

)

 

 

 

 

 

 

(9,036

)

 

(9,036

)

 

 

 

 

 

 

(8,841

)

 

(8,841

)

Deferred income taxes - non-current

 

 

 

 

 

(500

)

 

(500

)

 

 

 

 

 

 

(452

)

 

(452

)

 

 

 

 

 

 

(455

)

 

(455

)

Income taxes payable - current

 

 

 

 

 

240

 

 

240

 

 

 

 

 

 

 

646

 

 

646

 

 

 

 

 

 

 

253

 

 

253

 

Income taxes payable - long-term

 

 

 

 

 

3,099

 

 

3,099

 

 

 

 

 

 

 

3,099

 

 

3,099

 

 

 

 

 

 

 

3,365

 

 

3,365

 

Deferred income taxes - non-current

 

 

 

 

 

5,484

 

 

5,484

 

 

 

 

 

 

 

4,918

 

 

4,918

 

 

 

 

 

 

 

4,917

 

 

4,917

 

Deferred compensation

 

 

 

 

 

9,180

 

 

9,180

 

 

 

 

 

 

 

9,017

 

 

9,017

 

 

 

 

 

 

 

8,795

 

 

8,795

 

Total Capital Employed

$

86,830

 

$

21,676

 

$

3,931

 

$

112,437

 

 

$

78,572

 

$

17,302

 

$

3,577

 

$

99,451

 

 

$

75,548

 

$

15,204

 

$

2,258

 

$

93,010

 

CULP INC.

RETURN ON CAPITAL EMPLOYED BY SEGMENT - CONTINUED

FOR THE TWELVE MONTHS ENDED JANUARY 30, 2022

Unaudited

(Amounts in Thousands)

 

 

As of the three Months Ended May 2, 2021

 

 

As of the three Months Ended January 31, 2021

 

 

Mattress

 

Upholstery

 

Unallocated

 

 

 

 

Mattress

 

Upholstery

 

Unallocated

 

 

 

 

Fabrics

 

Fabrics

 

Corporate

 

Total

 

 

Fabrics

 

Fabrics

 

Corporate

 

Total

 

Total assets (4)

$

97,861

 

 

53,875

 

 

62,344

 

 

214,080

 

 

$

91,842

 

 

52,803

 

 

67,333

 

 

211,978

 

Total liabilities

 

(22,410

)

 

(38,709

)

 

(23,955

)

 

(85,074

)

 

 

(21,503

)

 

(38,061

)

 

(24,052

)

 

(83,616

)

Subtotal

$

75,451

 

$

15,166

 

$

38,389

 

$

129,006

 

 

$

70,339

 

$

14,742

 

$

43,281

 

$

128,362

 

Cash and cash equivalents

 

 

 

 

 

(37,009

)

 

(37,009

)

 

 

 

 

 

 

(35,987

)

 

(35,987

)

Short-term investments - Available-For-Sale

 

 

 

 

 

(5,542

)

 

(5,542

)

 

 

 

 

 

 

(5,548

)

 

(5,548

)

Short-term investments - Held-To-Maturity

 

 

 

 

 

(3,161

)

 

(3,161

)

 

 

 

 

 

 

(9,785

)

 

(9,785

)

Long-term investments - Held-To-Maturity

 

 

 

 

 

(1,141

)

 

(1,141

)

 

 

 

 

 

 

(512

)

 

(512

)

Long-term investments - Rabbi Trust

 

 

 

 

 

(8,415

)

 

(8,415

)

 

 

 

 

 

 

(8,232

)

 

(8,232

)

Deferred income taxes - non-current

 

 

 

 

 

(545

)

 

(545

)

 

 

 

 

 

 

(640

)

 

(640

)

Income taxes payable - current

 

 

 

 

 

229

 

 

229

 

 

 

 

 

 

 

1,129

 

 

1,129

 

Income taxes payable - long-term

 

 

 

 

 

3,326

 

 

3,326

 

 

 

 

 

 

 

3,325

 

 

3,325

 

Deferred income taxes - non-current

 

 

 

 

 

5,330

 

 

5,330

 

 

 

 

 

 

 

5,543

 

 

5,543

 

Deferred compensation

 

 

 

 

 

8,365

 

 

8,365

 

 

 

 

 

 

 

8,179

 

 

8,179

 

Total Capital Employed

$

75,451

 

$

15,166

 

$

(174

)

$

90,443

 

 

$

70,339

 

$

14,742

 

$

753

 

$

85,834

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mattress

 

Upholstery

 

Unallocated

 

 

 

 

 

 

 

 

 

 

 

 

 

Fabrics

 

Fabrics

 

Corporate

 

Total

 

 

 

 

 

 

 

 

 

 

Average Capital Employed (3)

$

77,348

 

$

16,818

 

$

2,069

 

$

96,235

 

 

 

 

 

 

 

 

 

 

Notes

 

 

(1)

See last page of this presentation for calculation.

(2)

Return on average capital employed represents the last twelve months operating (loss) income as of January 30, 2022, divided by average capital employed. Average capital employed does not include cash and cash equivalents, short-term investments Available-For-Sale, 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 January 30, 2022, October 31, 2021, August 1, 2021, May 2, 2021, and January 31, 2021.

(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.

CULP INC.

CONSOLIDATED STATEMENTS OF ADJUSTED OPERATING INCOME (LOSS)

FOR THE TWELVE MONTHS ENDED JANUARY 29, 2023, AND JANUARY 30, 2022

Unaudited

(Amounts in Thousands)

 

 

 

Quarter Ended

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trailing 12

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Months

 

 

 

5/1/2022

 

 

7/31/2022

 

 

10/30/2022

 

 

01/29/2023

 

 

01/29/2023

 

Mattress Fabrics

 

$

(2,901

)

 

$

(2,921

)

 

$

(9,002

)

 

$

(4,229

)

 

$

(19,053

)

Upholstery Fabrics

 

 

(116

)

 

 

542

 

 

 

262

 

 

 

(420

)

 

 

268