Culp, Inc. (NYSE: CULP) (together with its consolidated
subsidiaries, “CULP”) today reported financial and operating
results for the first quarter ended July 30, 2023.
Fiscal 2024 First Quarter Financial Summary
- Net sales for the first quarter of fiscal 2024 were $56.7
million, down 9.5 percent compared with the prior-year period, with
mattress fabrics sales flat, down 0.5 percent (a solid performance
in the face of industry softness), and upholstery fabrics sales
down 17.4 percent compared to a strong quarter the prior year
(fueled by a lift in sales following pandemic-related shutdowns in
China).
- Loss from operations was $(3.1) million, which included
$517,000 in mostly non-cash restructuring and related charges
associated with the discontinued production of cut and sewn
upholstery kits in Haiti during the quarter.
- Excluding this $517,000, adjusted loss from operations for the
quarter was $(2.6) million, a better-than-expected improvement as
compared with loss from operations of $(4.7) million for the
prior-year period and loss from operations of $(4.0) million for
the fourth quarter of fiscal 2023. (See reconciliation table at the
back of this press release.)
- Net loss was $(3.3) million, or $(0.27) per diluted share,
compared with a net loss of $(5.7) million, or $(0.47) per diluted
share, for the prior-year period. Net loss for the quarter included
the $517,000 in restructuring and related charges noted above. The
effective tax rate for the first quarter was negative (26.5)
percent, 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
of $16.8 million and no outstanding borrowings as of July 30, 2023.
Total liquidity as of July 30, 2023, was $42.3 million (consisting
of $16.8 million in cash and $25.5 million in borrowing
availability under the company's domestic credit facility).
- Adjusted EBITDA for the period was close to break even at
negative $(416,000), as compared to adjusted EBITDA of negative
$(2.7) million for the prior-year period.
CEO Commentary
Commenting on the results, Iv Culp, president and chief
executive officer of Culp, Inc., said, “We are pleased to report
better than expected improvement in our operating performance for
the first quarter, as we are continuing our aggressive business
transformation. As expected, our top-line performance was impacted
by the difficult macro-economic environment that continues to
pressure the industries we service. However, our operating
performance improved despite this pressure on sales, driven by
internal improvements in both businesses. In our mattress fabrics
segment, we continue to gain market position with the roll out of
new fabric and sewn cover placements that are priced in line with
current costs. This segment also achieved a 52 percent improvement
in its operating results as compared to the prior-year period, and
a 45 percent improvement as compared sequentially to the prior
quarter. These gains were driven by our ongoing focus on
operational efficiencies and cost reduction initiatives across our
locations. For the upholstery fabrics segment, we saw operational
improvements and fixed cost savings, along with solid demand in our
hospitality/contract business, including improvement for Read
Window. However, sales in our residential fabrics business were
lower as compared to the first quarter of last fiscal year, which
was a strong quarter, due to the ongoing demand softness affecting
the home furnishings industry.
“We also continued our diligent focus on prudent financial
management, including maintaining a strong balance sheet and
ensuring a strategic level of working capital. We ended the quarter
with $16.8 million in cash and no outstanding borrowings. We
believe we are well positioned, and we are strategically investing
in our business, especially within our mattress fabrics segment, to
support future profitable sales growth and further improve
operating efficiencies.
“Understanding that the furniture and bedding macro-environment
remains challenged, we continue to manage the aspects of our
business we can control, taking necessary steps to withstand
current market conditions and position our business for renewed
growth. We believe this recovery will be led by our mattress
fabrics segment, where our ongoing execution of a comprehensive
business transformation plan is laying the foundation for steady,
sequential improvement in this business. Although market conditions
are pressuring the residential home furnishings industry, it is
important to note that our upholstery fabrics business has
maintained consistent profitability despite these market pressures,
and demand remains solid in our growing hospitality business. We
also further rationalized our upholstery cut and sew operation in
Haiti during the quarter by discontinuing production of cut and
sewn upholstery kits from this platform. This move, which was
driven by ongoing demand softness for residential upholstery kits,
allows us to further reduce our cost structure while utilizing our
strong Asian (China and Vietnam) supply chain to support the needs
of our customers.
“While the difficult industry environment affecting the mattress
and residential home furnishings industries is expected to continue
for some time, our market position is strong and improving, and we
believe we are poised for a considerably better second half
performance, with a return to operating profitability in fiscal
2024. Regardless of the current demand backdrop, we expect
continued progress in improving our operating results, especially
in our mattress fabrics segment, but the speed of our recovery may
be affected by overall industry trends. We are well positioned for
the long term, and our strong leadership teams, innovative product
offerings, creative designs, and resilient global manufacturing and
sourcing platform will support us into the future, especially when
the industry environment improves,” added Culp.
Business Segment Highlights
Mattress Fabrics Segment (“CHF”) Summary
- Sales for this segment were $29.2 million for the first
quarter, down 0.5 percent compared with sales of $29.4 million in
the first quarter of fiscal 2023.
- Sales for the quarter were affected by ongoing industry demand
softness, with mattress industry analysis reflecting significant
contraction (10 percent in dollars, 20 percent in units) in the
domestic mattress market through the first six months of calendar
2023. Notably, CHF revenue over the same general period has
remained relatively flat, indicating that CHF has made gains with
customers in a difficult market environment.
- Operating loss was $(1.4) million for the first quarter, a 52
percent improvement compared to the $(2.9) million operating loss
in the prior-year period. Operating performance as compared to the
prior-year period was positively affected by new placements priced
in line with current costs, improvement in operating efficiencies,
and lower costs resulting from the restructuring and
rationalization of CHF's cut and sew mattress cover platform in
North Carolina initiated during the second quarter of fiscal
2023.
Upholstery Fabrics Segment (“CUF”) Summary
- Sales for this segment were $27.4 million for the first
quarter, down 17.4 percent compared with sales of $33.2 million in
the first quarter of fiscal 2023, which was a strong quarter due to
a lift in sales following pandemic-related shutdowns in China.
- Sales for CUF's residential fabric business for the quarter
were affected by ongoing softness in the residential home
furnishings industry, where demand remains pressured by a
challenging macro-economic environment. Demand remained solid for
CUF’s hospitality/contract business during the quarter, with sales
for this business accounting for approximately 33 percent of CUF's
total sales.
- Operating income and operating margin were $1.3 million and 4.8
percent, a 145 percent and 320 basis points improvement,
respectively, compared with the prior-year period. Operating
performance for the first quarter, as compared to the prior-year
period, was positively affected by a higher contribution from
hospitality fabrics and the Read Window business; lower costs
resulting from the restructuring of CUF's cut and sew platforms
during earlier periods; and a more favorable foreign exchange rate
associated with CUF's operations in China, as well as other
operational improvements. These factors were partially offset by
lower residential fabric sales and higher SG&A during the
period.
- Based on continued demand softness for residential upholstery
kits, as well as the strength of CUF's Asian platform, CUF took
action during the quarter to discontinue production of cut and sewn
upholstery kits in Haiti. This step, which follows an earlier
rationalization of this platform in fiscal 2023, resulted in
$517,000 in restructuring and related charges during the quarter.
CUF took this initiative to further reduce its cost structure and
avoid losses that would have otherwise been incurred, while
continuing to support customers through its Asian supply chain for
cut and sewn kits.
Balance Sheet, Cash Flow, and Liquidity
- As of July 30, 2023, the company reported $16.8 million in
total cash and no outstanding debt.
- Cash flow from operations and free cash flow were negative
$(4.4) million and negative $(4.2) million, respectively, for the
first three months of fiscal 2024. (See reconciliation table at the
back of this press release.) The company’s cash flow from
operations and free cash flow during the period were affected by
operating losses and investments in working capital and capital
expenditures mostly related to the CHF transformation plan.
- Capital expenditures for the first three months of fiscal 2024
were $513,000. The company continues to manage capital investments,
focusing on projects that will increase efficiencies and improve
quality.
- As of July 30, 2023, the company had approximately $42.3
million in liquidity, consisting of $16.8 million in total cash and
$25.5 million in borrowing availability under the company's
domestic credit facility.
Share Repurchases
The company did not repurchase any shares during the first
quarter of fiscal 2024, leaving approximately $3.2 million
available under the current share repurchase program as of July 30,
2023. Despite the current share repurchase authorization, the
company does not expect to repurchase any shares during the second
quarter of fiscal 2024.
Financial Outlook
- CULP achieved sequential and year-over-year improvement in its
operating results for the first quarter of fiscal 2024, although as
expected, sales were pressured by ongoing industry demand softness.
While the current macroeconomic conditions affecting consumer
spending and demand trends are likely to remain for some period,
the company remains well-positioned for the long term, especially
with the transformation strategy underway in its mattress fabrics
division.
- Due to the continued volatility in the macro-environment, the
company is providing only limited financial guidance for the second
quarter of fiscal 2024. The company’s consolidated net sales for
the second quarter are expected to be comparable to the second
quarter of fiscal 2023, driven by further improvement in the
mattress fabrics segment, but offset by lower residential
upholstery fabric sales. The company expects a consolidated
operating loss (loss from operations) for the second quarter of
fiscal 2024 that is in the range of $(2.2) to $(2.6) million, a
significant improvement compared to the $(11.9) million operating
loss for the prior-year period (which included approximately $6.0
million relating to certain inventory impairment charges, losses
from inventory close out sales, and greater than normal inventory
markdowns).
- 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.
Conference Call
Culp, Inc. will hold a conference call to discuss financial
results for the first quarter of fiscal 2024 on August 31, 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 August 31, 2023.
Investor Relations Contact
Ken Bowling, EVP, CFO and Treasurer: (336) 881-5630
krbowling@culp.com
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. 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, 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 JULY
30, 2023, AND JULY 31, 2022
Unaudited
(Amounts in Thousands, Except
for Per Share Data)
THREE MONTHS ENDED
Amount
Percent of Sales
(3)
July 30,
July 31,
% Over
July 30,
July 31,
2023
2022
(Under)
2023
2022
Net sales
56,662
62,604
(9.5
)%
100.0
%
100.0
%
Cost of sales
(49,577
)
(58,476
)
(15.2
)%
87.5
%
93.4
%
Gross profit
7,085
4,128
71.6
%
12.5
%
6.6
%
Selling, general and administrative
expenses
(9,829
)
(8,866
)
10.9
%
17.3
%
14.2
%
Restructuring expense (2) (3)
(338
)
—
100.0
%
0.6
%
—
Loss from operations
(3,082
)
(4,738
)
(35.0
)%
(5.4
)%
(7.6
)%
Interest income
345
17
N.M.
0.6
%
0.0
%
Other income (expense)
96
(82
)
(217.1
)%
0.2
%
0.1
%
Loss before income taxes
(2,641
)
(4,803
)
(45.0
)%
(4.7
)%
(7.7
)%
Income tax expense (1)
(701
)
(896
)
(21.8
)%
(26.5
)%
(18.7
)%
Net loss
(3,342
)
(5,699
)
(41.4
)%
(5.9
)%
(9.1
)%
Net loss per share - basic
$
(0.27
)
$
(0.47
)
(41.8
)%
Net loss per share - diluted
$
(0.27
)
$
(0.47
)
(41.8
)%
Average shares outstanding-basic
12,332
12,238
0.8
%
Average shares outstanding-diluted
12,332
12,238
0.8
%
Notes
(1)
Percent of sales column for
income tax expense is calculated as a % of loss before income
taxes.
(2)
Restructuring expense of $338,000
for the three-months ending July 30, 2023, represents a $237,000
impairment charge related mostly to certain machinery and equipment
and $101,000 of employee termination benefits related to the
discontinuation of production of cut and sewn upholstery kits at
our facility in Ouanaminthe, Haiti.
(3)
See page 11 for our
Reconciliation of Selected Income Statement Information to Adjusted
Results for the three-months ending July 30, 2023.
CONSOLIDATED BALANCE
SHEETS
JULY 30 2023, JULY 31, 2022,
AND APRIL 30, 2023
Unaudited
(Amounts in Thousands)
Amounts
(Condensed)
(Condensed)
(Condensed)
July 30,
July 31,
Increase (Decrease)
* April 30,
2023
2022
Dollars
Percent
2023
Current assets
Cash and cash equivalents
$
16,812
18,874
(2,062
)
(10.9
)%
20,964
Short-term investments - Rabbi Trust
791
—
791
100.0
%
1,404
Accounts receivable
22,612
24,812
(2,200
)
(8.9
)%
24,778
Inventories
43,817
63,749
(19,932
)
(31.3
)%
45,080
Short-term note receivable
252
—
252
100.0
%
219
Current income taxes receivable
202
798
(596
)
(74.7
)%
—
Other current assets
3,578
3,840
(262
)
(6.8
)%
3,071
Total current assets
88,064
112,073
(24,009
)
(21.4
)%
95,516
Property, plant & equipment, net
34,929
40,490
(5,561
)
(13.7
)%
36,111
Right of use assets
7,466
14,556
(7,090
)
(48.7
)%
8,191
Long-term investments - Rabbi Trust
7,204
9,567
(2,363
)
(24.7
)%
7,067
Intangible assets
2,158
2,534
(376
)
(14.8
)%
2,252
Long-term note receivable
1,661
—
1,661
100.0
%
1,726
Deferred income taxes
476
546
(70
)
(12.8
)%
480
Other assets
944
724
220
30.4
%
840
Total assets
$
142,902
180,490
(37,588
)
(20.8
)%
152,183
Current liabilities
Accounts payable - trade
26,468
29,097
(2,629
)
(9.0
)%
29,442
Accounts payable - capital
expenditures
257
346
(89
)
(25.7
)%
56
Operating lease liability - current
2,558
3,126
(568
)
(18.2
)%
2,640
Deferred compensation
791
—
791
100.0
%
1,404
Deferred revenue
1,026
1,368
(342
)
(25.0
)%
1,192
Accrued expenses
6,615
7,158
(543
)
(7.6
)%
8,533
Accrued restructuring
10
—
10
100.0
%
—
Income taxes payable - current
526
587
(61
)
(10.4
)%
753
Total current liabilities
38,251
41,682
(3,431
)
(8.2
)%
44,020
Operating lease liability - long-term
2,994
6,160
(3,166
)
(51.4
)%
3,612
Income taxes payable - long-term
2,710
3,118
(408
)
(13.1
)%
2,675
Deferred income taxes
5,864
6,007
(143
)
(2.4
)%
5,954
Deferred compensation
6,966
9,528
(2,562
)
(26.9
)%
6,842
Total liabilities
56,785
66,495
(9,710
)
(14.6
)%
63,103
Shareholders' equity
86,117
113,995
(27,878
)
(24.5
)%
89,080
Total liabilities and shareholders'
equity
$
142,902
180,490
(37,588
)
(20.8
)%
152,183
Shares outstanding
12,344
12,275
69
0.6
%
12,327
* Derived from audited financial statements.
CULP, INC.
CONSOLIDATED STATEMENTS OF
CASH FLOWS
FOR THE THREE MONTHS ENDED
JULY 30, 2023, AND JULY 31, 2022
Unaudited
(Amounts in Thousands)
THREE MONTHS ENDED
Amounts
July 30,
July 31,
2023
2022
Cash flows from operating activities:
Net loss
$
(3,342
)
$
(5,699
)
Adjustments to reconcile net loss to net
cash (used in) provided by operating activities:
Depreciation
1,635
1,770
Non-cash inventory (credit) charge (2)
(3)
(717
)
1,421
Amortization
96
105
Stock-based compensation
322
252
Deferred income taxes
(86
)
(15
)
Gain on sale of equipment
(270
)
(64
)
Non-cash restructuring expense
237
—
Foreign currency exchange gain
(372
)
(161
)
Changes in assets and liabilities:
Accounts receivable
2,112
(2,643
)
Inventories
1,792
1,223
Other current assets
(526
)
(955
)
Other assets
(134
)
21
Accounts payable
(2,353
)
9,338
Deferred revenue
(166
)
848
Accrued restructuring
10
—
Accrued expenses and deferred
compensation
(2,311
)
(413
)
Income taxes
(362
)
281
Net cash (used in) provided by operating
activities
(4,435
)
5,309
Cash flows from investing activities:
Capital expenditures
(513
)
(711
)
Proceeds from the sale of equipment
294
166
Proceeds from note receivable
60
—
Proceeds from the sale of long-term
investments (rabbi trust)
780
23
Purchase of long-term investments (rabbi
trust)
(247
)
(236
)
Net cash provided by (used in) investing
activities
374
(758
)
Cash flows from financing activities:
Payments of debt issuance costs
—
(161
)
Net cash used in financing activities
—
(161
)
Effect of exchange rate changes on cash
and cash equivalents
(91
)
(66
)
(Decrease) increase in cash and cash
equivalents
(4,152
)
4,324
Cash and cash equivalents at beginning of
year
20,964
14,550
Cash and cash equivalents at end of
period
$
16,812
$
18,874
Free Cash Flow (1)
$
(4,152
)
$
4,485
(1)
See next page for Reconciliation
of Free Cash Flow for the three-month periods ending July 30, 2023,
and July 31, 2022, respectively.
(2)
The non-cash inventory credit of
$717,000 for the three-months ending July 30, 2023, represents an
$896,000 credit related to adjustments made to our inventory
markdown reserve estimated based on our policy for aged inventory
for both our operating segments, partially offset by a charge of
$179,000 for markdowns of inventory related to the discontinuation
of our cut and sew upholstery fabrics operation located in
Ouanaminthe, Haiti.
(3)
The non-cash inventory charge of
$1.4 million for the three-months ending July 31, 2022, represents
adjustments made to our inventory markdown reserve estimated based
on our policy for aged inventory for both our operating
segments.
Reconciliation of Free Cash Flow:
THREE MONTHS ENDED
Amounts
July 30,
July 31,
2023
2022
A) Net cash (used in) provided by
operating activities
$
(4,435
)
$
5,309
B) Minus: Capital expenditures
(513
)
(711
)
C) Plus: Proceeds from the sale of
equipment
294
166
D) Plus: Proceeds from note receivable
60
—
E) Plus: Proceeds from the sale of
long-term investments (rabbi trust)
780
23
F) Minus: Purchase of long-term
investments (rabbi trust)
(247
)
(236
)
G) Effects of exchange rate changes on
cash and cash equivalents
(91
)
(66
)
Free Cash Flow
$
(4,152
)
$
4,485
CULP, INC.
STATEMENTS OF OPERATIONS BY
SEGMENT
FOR THE THREE MONTHS ENDED
JULY 30, 2023, AND JULY 31, 2022
Unaudited
(Amounts in Thousands)
THREE MONTHS ENDED
Amounts
Percent of Total Sales
July 30,
July 31,
% Over
July 30,
July 31,
Net Sales by Segment
2023
2022
(Under)
2023
2022
Mattress Fabrics
$
29,222
$
29,371
(0.5
)%
51.6
%
46.9
%
Upholstery Fabrics
27,440
33,233
(17.4
)%
48.4
%
53.1
%
Net Sales
$
56,662
$
62,604
(9.5
)%
100.0
%
100.0
%
Gross Profit
Gross Margin
Mattress Fabrics
$
1,994
$
(37
)
N.M.
6.8
%
(0.1
)%
Upholstery Fabrics
5,270
4,165
26.5
%
19.2
%
12.5
%
Total Segment Gross Profit
7,264
4,128
76.0
%
12.8
%
6.6
%
Restructuring Related Charge (3)
(179
)
—
100.0
%
(0.3
)%
—
Gross Profit
$
7,085
$
4,128
71.6
%
12.5
%
6.6
%
Selling, General and Administrative
Expenses by Segment
Percent of Sales
Mattress Fabrics
$
3,393
$
2,885
17.6
%
11.6
%
9.8
%
Upholstery Fabrics
3,941
3,622
8.8
%
14.4
%
10.9
%
Unallocated Corporate Expenses
2,495
2,359
5.8
%
4.4
%
3.8
%
Selling, General and Administrative
Expenses
$
9,829
$
8,866
10.9
%
17.3
%
14.2
%
(Loss) Income from Operations by
Segment
Operating Margin
Mattress Fabrics
$
(1,398
)
$
(2,921
)
(52.1
)%
(4.8
)%
(9.9
)%
Upholstery Fabrics
1,328
542
145.0
%
4.8
%
1.6
%
Unallocated Corporate Expenses
(2,495
)
(2,359
)
5.8
%
(4.4
)%
(3.8
)%
Total Segment Loss from Operations
(2,565
)
(4,738
)
(45.9
)%
(4.5
)%
(7.6
)%
Restructuring Related Charge (3)
(179
)
—
100.0
%
(0.3
)%
—
Restructuring Expense (3)
(338
)
—
100.0
%
(0.6
)%
—
Loss from Operations
$
(3,082
)
$
(4,738
)
(35.0
)%
(5.4
)%
(7.6
)%
Return on Capital (1)
Mattress Fabrics
(25.4
)%
(2.9
)%
775.9
%
Upholstery Fabrics
18.2
%
19.6
%
(7.1
)%
Unallocated Corporate
N.M.
N.M.
N.M.
Consolidated
(28.6
)%
(7.1
)%
302.8
%
Capital Employed (1) (2)
Mattress Fabrics
$
61,056
$
78,908
(22.6
)%
Upholstery Fabrics
12,357
20,291
(39.1
)%
Unallocated Corporate
4,086
4,251
(3.9
)%
Consolidated
$
77,499
$
103,450
(25.1
)%
Depreciation Expense by Segment
Mattress Fabrics
$
1,455
$
1,568
(7.2
)%
Upholstery Fabrics
180
202
(10.9
)%
Depreciation Expense
$
1,635
$
1,770
(7.6
)%
Notes
(1)
See pages 13 through 16 for our
Return on Capital Employed by Segment for the three-months ending
July 30, 2023 and July 31, 2022.
(2)
The capital employed balances are
as of July 30, 2023 and July 31, 2022.
(3)
See next page for our
Reconciliation of Selected Income Statement Information to Adjusted
Results for the three-months ending July 30, 2023.
CULP, INC.
RECONCILIATION OF SELECTED
INCOME STATEMENT INFORMATION TO ADJUSTED RESULTS
FOR THREE MONTHS ENDED JULY
30, 2023
Unaudited
(Amounts in Thousands)
As Reported
July 30, 2023
July 30,
Adjusted
2023
Adjustments
Results
Net sales
$
56,662
—
$
56,662
Cost of sales (1)
(49,577
)
179
(49,398
)
Gross profit
7,085
179
7,264
Selling, general and administrative
expenses
(9,829
)
—
(9,829
)
Restructuring expense (2)
(338
)
338
—
Loss from operations
$
(3,082
)
517
$
(2,565
)
Notes
(1)
Cost of sales for the
three-months ending July 30, 2023, includes restructuring related
charges totaling $179,000 for the markdowns of inventory related to
the discontinuation of production of cut and sewn upholstery kits
at our facility in Ouanaminthe, Haiti.
(2)
Restructuring expense of $338,000
for the three-months ending July 30, 2023, represents a $237,000
impairment charge related mostly to certain machinery and equipment
and $101,000 of employee termination benefits related to the
discontinuation of production of cut and sewn upholstery kits at
our facility in Ouanaminthe, Haiti.
CULP, INC.
CONSOLIDATED STATEMENTS OF
ADJUSTED EBITDA
FOR THE TWELVE MONTHS ENDED
JULY 30, 2023, AND JULY 31, 2022
Unaudited
(Amounts in Thousands)
Quarter Ended
Quarter Ended
Quarter Ended
Quarter Ended
Trailing 12 Months
October 30,
January 29,
April 30,
July 30,
July 30,
2022
2023
2023
2023
2023
Net loss (1)
$
(12,173
)
$
(8,968
)
$
(4,681
)
$
(3,342
)
$
(29,164
)
Income tax expense
1,150
286
798
701
2,935
Interest income, net
(79
)
(196
)
(239
)
(345
)
(859
)
Depreciation expense
1,719
1,739
1,619
1,635
6,712
Restructuring expense
615
711
70
338
1,734
Restructuring related charge
98
—
—
179
277
Amortization expense
109
109
115
96
429
Stock based compensation
313
322
258
322
1,215
Adjusted EBITDA (1)
$
(8,248
)
$
(5,997
)
$
(2,060
)
$
(416
)
$
(16,721
)
% Net Sales
(14.1
)%
(11.4
)%
(3.4
)%
(0.7
)%
(7.3
)%
Quarter Ended
Quarter Ended
Quarter Ended
Quarter Ended
Trailing 12 Months
October 31,
January 30,
May 1,
July 31,
July 31,
2021
2022
2022
2022
2022
Net income (loss)
$
851
$
(289
)
$
(6,023
)
$
(5,699
)
$
(11,160
)
Income tax expense
444
1,284
253
896
2,877
Interest income, net
(59
)
(214
)
(9
)
(17
)
(299
)
Depreciation expense
1,745
1,732
1,791
1,770
7,038
Amortization expense
146
150
142
105
543
Stock based compensation
435
171
253
252
1,111
Adjusted EBITDA
$
3,562
$
2,834
$
(3,593
)
$
(2,693
)
$
110
% Net Sales
4.8
%
3.5
%
(6.3
)%
(4.3
)%
0.0
%
% Over (Under)
(331.6
)%
(311.6
)%
(42.7
)%
(84.6
)%
N.M.
(1)
Net loss and adjusted EBITDA for
the quarter ended October 30, 2022, and the twelve-month period
ended July 30, 2023, 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 for both operating segments.
CULP, INC.
RETURN ON CAPITAL EMPLOYED BY
SEGMENT
FOR THE TWELVE MONTHS ENDED
JULY 30, 2023
Unaudited
(Amounts in Thousands)
Adjusted Operating (Loss)
Income
Twelve Months Ended
Average Capital
Return on Avg. Capital
July 30, 2023 (1)
Employed (3)
Employed (2)
Mattress Fabrics
$
(17,159
)
$
67,685
(25.4
)%
Upholstery Fabrics
2,781
15,283
18.2
%
Unallocated Corporate
(10,434
)
3,862
N.M.
Total
$
(24,812
)
$
86,830
(28.6
)%
Average Capital Employed
As of the three Months Ended
July 30, 2023
As of the three Months Ended
April 30, 2023
As of the three Months Ended
January 29, 2023
Mattress
Upholstery
Unallocated
Mattress
Upholstery
Unallocated
Mattress
Upholstery
Unallocated
Fabrics
Fabrics
Corporate
Total
Fabrics
Fabrics
Corporate
Total
Fabrics
Fabrics
Corporate
Total
Total assets (4)
$
72,286
37,592
33,024
142,902
$
75,494
39,127
37,562
152,183
$
75,393
39,817
35,388
150,598
Total liabilities
(11,230
)
(25,235
)
(20,320
)
(56,785
)
(11,387
)
(29,638
)
(22,078
)
(63,103
)
(9,511
)
(24,367
)
(23,216
)
(57,094
)
Subtotal
$
61,056
$
12,357
$
12,704
$
86,117
$
64,107
$
9,489
$
15,484
$
89,080
$
65,882
$
15,450
$
12,172
$
93,504
Cash and cash equivalents
—
—
(16,812
)
(16,812
)
—
—
(20,964
)
(20,964
)
—
—
(16,725
)
(16,725
)
Short-term investments - Rabbi
Trust
—
—
(791
)
(791
)
—
—
(1,404
)
(1,404
)
—
—
(2,420
)
(2,420
)
Current income taxes receivable
—
—
(202
)
(202
)
—
—
—
—
—
—
(238
)
(238
)
Long-term investments - Rabbi
Trust
—
—
(7,204
)
(7,204
)
—
—
(7,067
)
(7,067
)
—
—
(7,725
)
(7,725
)
Deferred income taxes -
non-current
—
—
(476
)
(476
)
—
—
(480
)
(480
)
—
—
(463
)
(463
)
Deferred compensation - current
—
—
791
791
—
—
1,404
1,404
—
—
2,420
2,420
Accrued restructuring
—
—
10
10
—
—
—
—
—
—
—
—
Income taxes payable - current
—
—
526
526
—
—
753
753
—
—
467
467
Income taxes payable -
long-term
—
—
2,710
2,710
—
—
2,675
2,675
—
—
2,648
2,648
Deferred income taxes -
non-current
—
—
5,864
5,864
—
—
5,954
5,954
—
—
6,089
6,089
Deferred compensation
non-current
—
—
6,966
6,966
—
—
6,842
6,842
—
—
7,590
7,590
Total Capital Employed
$
61,056
$
12,357
$
4,086
$
77,499
$
64,107
$
9,489
$
3,197
$
76,793
$
65,882
$
15,450
$
3,815
$
85,147
CULP, INC.
RETURN ON CAPITAL EMPLOYED BY
SEGMENT - CONTINUED
FOR THE TWELVE MONTHS ENDED
JULY 30, 2023
Unaudited
(Amounts in Thousands)
As of the three Months Ended
October 30, 2022
As of the three Months Ended
July 31, 2022
Mattress
Upholstery
Unallocated
Mattress
Upholstery
Unallocated
Fabrics
Fabrics
Corporate
Total
Fabrics
Fabrics
Corporate
Total
Total assets (4)
$
78,366
44,934
38,330
161,630
$
90,842
51,053
38,595
180,490
Total liabilities
(9,895
)
(26,108
)
(23,519
)
(59,522
)
(11,934
)
(30,762
)
(23,799
)
(66,495
)
Subtotal
$
68,471
$
18,826
$
14,811
$
102,108
$
78,908
$
20,291
$
14,796
$
113,995
Cash and cash equivalents
—
—
(19,137
)
(19,137
)
—
—
(18,874
)
(18,874
)
Short-term investments - Rabbi
Trust
—
—
(2,237
)
(2,237
)
—
—
—
—
Current income taxes receivable
—
—
(510
)
(510
)
—
—
(798
)
(798
)
Long-term investments - Rabbi
Trust
—
—
(7,526
)
(7,526
)
—
—
(9,567
)
(9,567
)
Deferred income taxes -
non-current
—
—
(493
)
(493
)
—
—
(546
)
(546
)
Deferred compensation - current
—
—
2,237
2,237
—
—
—
—
Accrued restructuring
—
—
33
33
—
—
—
—
Income taxes payable - current
—
—
969
969
—
—
587
587
Income taxes payable -
long-term
—
—
2,629
2,629
—
—
3,118
3,118
Deferred income taxes -
non-current
—
—
5,700
5,700
—
—
6,007
6,007
Deferred compensation
non-current
—
—
7,486
7,486
—
—
9,528
9,528
Total Capital Employed
$
68,471
$
18,826
$
3,962
$
91,259
$
78,908
$
20,291
$
4,251
$
103,450
Mattress
Upholstery
Unallocated
Fabrics
Fabrics
Corporate
Total
Average Capital Employed (3)
$
67,685
$
15,283
$
3,862
$
86,830
Notes
(1)
See last page of this
presentation for calculation.
(2)
Return on average capital
employed represents the twelve-months operating (loss) income as of
July 30, 2023, divided by average capital employed. Average capital
employed does not include cash and cash equivalents, short-term and
long-term investments – Rabbi Trust, income taxes receivable and
payable, accrued restructuring, 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 July 30, 2023,
April 30, 2023, January 29, 2023, October 30, 2022, and July 31,
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
JULY 31, 2022
Unaudited
(Amounts in Thousands)
Adjusted Operating (Loss)
Income
Twelve Months Ended
Average Capital
Return on Avg. Capital
July 31, 2022 (1)
Employed (3)
Employed (2)
Mattress Fabrics
$
(2,319
)
$
80,780
(2.9
)%
Upholstery Fabrics
3,900
19,936
19.6
%
Unallocated Corporate
(8,959
)
3,567
N.M.
Total
$
(7,378
)
$
104,283
(7.1
)%
Average Capital Employed
As of the three Months Ended
July 31, 2022
As of the three Months Ended
May 1, 2022
As of the three Months Ended
January 30, 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)
$
90,842
51,053
38,595
180,490
$
92,609
51,124
33,830
177,563
$
103,370
67,272
40,925
211,567
Total liabilities
(11,934
)
(30,762
)
(23,799
)
(66,495
)
(8,569
)
(25,915
)
(23,578
)
(58,062
)
(16,540
)
(45,596
)
(22,697
)
(84,833
)
Subtotal
$
78,908
$
20,291
$
14,796
$
113,995
$
84,040
$
25,209
$
10,252
$
119,501
$
86,830
$
21,676
$
18,228
$
126,734
Cash and cash equivalents
—
—
(18,874
)
(18,874
)
—
—
(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
—
—
(798
)
(798
)
—
—
(857
)
(857
)
—
—
(367
)
(367
)
Long-term investments -
Held-To-Maturity
—
—
—
—
—
—
—
—
—
—
(8,677
)
(8,677
)
Long-term investments - Rabbi
Trust
—
—
(9,567
)
(9,567
)
—
—
(9,357
)
(9,357
)
—
—
(9,223
)
(9,223
)
Deferred income taxes -
non-current
—
—
(546
)
(546
)
—
—
(528
)
(528
)
—
—
(500
)
(500
)
Income taxes payable - current
—
—
587
587
—
—
413
413
—
—
240
240
Income taxes payable -
long-term
—
—
3,118
3,118
—
—
3,097
3,097
—
—
3,099
3,099
Deferred income taxes -
non-current
—
—
6,007
6,007
—
—
6,004
6,004
—
—
5,484
5,484
Deferred compensation
—
—
9,528
9,528
—
—
9,343
9,343
—
—
9,180
9,180
Total Capital Employed
$
78,908
$
20,291
$
4,251
$
103,450
$
84,040
$
25,209
$
3,817
$
113,066
$
86,830
$
21,676
$
3,931
$
112,437
CULP INC.
RETURN ON CAPITAL EMPLOYED BY SEGMENT -
CONTINUED
FOR THE TWELVE MONTHS ENDED JULY 31,
2022
Unaudited
(Amounts in Thousands)
As of the three Months Ended
October 31, 2021
As of the three Months Ended
August 1, 2021
Mattress
Upholstery
Unallocated
Mattress
Upholstery
Unallocated
Fabrics
Fabrics
Corporate
Total
Fabrics
Fabrics
Corporate
Total
Total assets (4)
$
97,390
55,862
56,073
209,325
$
96,846
55,187
60,215
212,248
Total liabilities
(18,818
)
(38,560
)
(23,493
)
(80,871
)
(21,298
)
(39,983
)
(21,418
)
(82,699
)
Subtotal
$
78,572
$
17,302
$
32,580
$
128,454
$
75,548
$
15,204
$
38,797
$
129,549
Cash and cash equivalents
—
—
(16,956
)
(16,956
)
—
—
(26,061
)
(26,061
)
Short-term investments -
Available-For-Sale
—
—
(9,709
)
(9,709
)
—
—
(9,698
)
(9,698
)
Short-term investments -
Held-To-Maturity
—
—
(1,564
)
(1,564
)
—
—
(1,661
)
(1,661
)
Current income taxes receivable
—
—
(613
)
(613
)
—
—
(524
)
(524
)
Long-term investments -
Held-To-Maturity
—
—
(8,353
)
(8,353
)
—
—
(6,629
)
(6,629
)
Long-term investments - Rabbi
Trust
—
—
(9,036
)
(9,036
)
—
—
(8,841
)
(8,841
)
Deferred income taxes -
non-current
—
—
(452
)
(452
)
—
—
(455
)
(455
)
Income taxes payable - current
—
—
646
646
—
—
253
253
Income taxes payable -
long-term
—
—
3,099
3,099
—
—
3,365
3,365
Deferred income taxes -
non-current
—
—
4,918
4,918
—
—
4,917
4,917
Deferred compensation
—
—
9,017
9,017
—
—
8,795
8,795
Total Capital Employed
$
78,572
$
17,302
$
3,577
$
99,451
$
75,548
$
15,204
$
2,258
$
93,010
Mattress
Upholstery
Unallocated
Fabrics
Fabrics
Corporate
Total
Average Capital Employed (3)
$
80,780
$
19,936
$
3,567
$
104,283
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 July 31, 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 July 31, 2022, May
1, 2022, January 30, 2022, October 31, 2021, and August 1,
2021.
(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.
CONSOLIDATED STATEMENTS OF
ADJUSTED OPERATING (LOSS) INCOME
FOR THE TWELVE MONTHS ENDED
JULY 30, 2023, AND JULY 31, 2022
Quarter Ended
Trailing 12
Months
10/30/2022
01/29/2023
4/30/2023
07/30/2023
07/30/2023
Mattress Fabrics
$
(9,002
)
$
(4,229
)
$
(2,530
)
$
(1,398
)
$
(17,159
)
Upholstery Fabrics
262
(420
)
1,611
1,328
2,781
Unallocated Corporate
(2,478
)
(2,423
)
(3,038
)
(2,495
)
(10,434
)
Operating loss
$
(11,218
)
$
(7,072
)
$
(3,957
)
$
(2,565
)
$
(24,812
)
Quarter Ended
Trailing 12
Months
10/31/2021
01/30/2022
5/1/2022
7/31/2022
7/31/2022
Mattress Fabrics
$
3,139
$
364
$
(2,901
)
$
(2,921
)
$
(2,319
)
Upholstery Fabrics
1,028
2,446
(116
)
542
3,900
Unallocated Corporate
(2,527
)
(1,707
)
(2,366
)
(2,359
)
(8,959
)
Operating income (loss)
$
1,640
$
1,103
$
(5,383
)
$
(4,738
)
$
(7,378
)
% Over (Under)
(784.0
)%
(741.2
)%
(26.5
)%
(45.9
)%
236.3
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230830309088/en/
Investor Relations Contact Ken Bowling, EVP, CFO and
Treasurer: (336) 881-5630 krbowling@culp.com
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