Culp Announces Results for First Quarter Fiscal 2019
Fiscal 2019 First Quarter Highlights
-
Net sales were
$71.5 million , down 10.1 percent over the prior year, with mattress fabrics sales down 23.6 percent and upholstery fabrics sales up 10.9 percent. -
Pre-tax income was
$1.9 million , compared with$6.7 million for the prior year period. Excluding restructuring and related charges of approximately$2.0 million , pre-tax income was$4.0 million for the first quarter of fiscal 2019. (See reconciliation table on page 6). -
Net income was
$957,000 , or$0.08 per diluted share, compared with net income of$5.0 million , or$0.40 per diluted share, in the prior year period. These results include the$2.0 million in restructuring and related charges noted above. -
The company’s financial position reflected total cash and investments
of
$39.3 million and$4.0 million outstanding on the company’s line of credit as ofJuly 29, 2018 , for a net cash position of$35.3 million . (See summary of cash and investments table on page 6). -
The company announced a quarterly cash dividend of
$0.09 per share, payable in October. - Completed the majority ownership investment in eLuxury, an e-commerce company offering bedding accessories and home goods direct to consumers.
Financial Outlook
-
The projection for the second quarter of fiscal 2019 is for overall
sales to be down approximately 5 percent compared to the same period
last year. Pre-tax income is expected to be in the range of
$3.6 million to $4.6 million , excluding any restructuring and related expenses and credits. Pre-tax income for the second quarter of fiscal 2018 was$6.2 million . - The company’s performance for the second half of fiscal 2019 is currently expected to be more in line with the results achieved during the second half of last fiscal year, assuming bedding industry relief materializes under U.S. trade laws.
Overview
For the first quarter ended
Commenting on the results,
“Overall, our operating performance for the first quarter was affected
by lower sales of mattress fabrics, an unfavorable currency exchange
rate in
Mattress Fabrics Segment
Mattress fabrics sales for the first quarter were
“As expected, our sales for the first quarter reflect the significant
disruptions and uncertainties surrounding the mattress industry compared
with market conditions a year ago,” said Iv Culp, president of Culp’s
mattress fabrics division. “We have continued to face very soft demand
trends related to the rapid growth of low-cost imported mattresses from
“We have remained focused on our product diversification strategy with a favorable product mix of mattress fabrics and sewn covers. Although we experienced lower sales for CLASS, our mattress cover business, as compared to the same period last year, we are pleased with the recent trends. We are expanding our business with existing customers, and we are also seeing orders from new customers in the growing boxed bedding space. We recently launched our new line of bedding accessories, marketed under the brand name, ‘Comfort Supply Company by Culp,’ and we remain excited about the opportunities to extend our market reach. As we have identified additional marketing channels, we have also implemented a new digital marketing strategy and expanded our social media presence to enhance Culp’s brand awareness and increase sales, especially with younger consumers.
“During the first quarter, we completed our previously announced
majority ownership investment in eLuxury, an e-commerce company offering
bedding accessories and home goods direct to consumers. This strategic
investment substantially expands our addressable market, provides an
important new sales channel for
“We have been aggressive over the past two years as we worked to create
a sustainable, efficient platform with enhanced capacity and
distribution capabilities,” added
“Looking ahead, we see continued uncertainty in the mattress industry
that will affect short-term demand trends and our operating performance.
We are optimistic that the proposed relief being sought by the bedding
industry under U.S. trade laws to address the impact of imported,
low-priced mattresses from
Upholstery Fabrics Segment
Sales for this segment were
“Our upholstery fabrics sales were in line with expectations for
the first quarter of fiscal 2019, with a solid 10.9 percent growth in
sales compared with the first quarter sales performance a year ago,”
noted
“Our results reflect consistent organic growth with our
“As expected, our operating performance for the first quarter of fiscal
2019 was primarily affected by an unfavorable currency exchange rate in
“Looking ahead, currently the impact of the proposed tariffs and the
associated geopolitical risks are uncertain. We are monitoring the
situation and the potential impact on Culp’s business, and if additional
tariffs are implemented, we will determine an appropriate response.
Additionally, we continue to closely monitor the gradual increase in raw
material costs in
Balance Sheet
“Maintaining a strong financial position is one of Culp’s top priorities
for fiscal 2019,” added
Dividends and Share Repurchases
The company also announced that the Board of Directors approved the
payment of the company’s quarterly cash dividend of
The company repurchased approximately 3,000 shares at the end of the
first quarter of fiscal 2019, leaving
Since
Financial Outlook
Commenting on the outlook for the second quarter of fiscal 2019, Bowling remarked, “We expect overall sales to be down approximately 5.0 percent compared with the second quarter of last year.
“We expect sales, operating income and margins in our mattress fabrics segment to show sequential improvement, but to be lower than the second quarter of fiscal 2018. Assuming the mattress industry stabilizes, bedding industry relief materializes under U.S. trade laws and business conditions improve, we expect to see more normalized trends in the second half of fiscal 2019 that are more in line with the prior year.
“In our upholstery fabrics segment, we expect sales to be slightly
higher compared to the same time last year. Operating income and margins
are expected to be slightly up compared with the same period a year ago,
assuming more favorable trends in currency exchange rates and the
elimination of operating losses associated with the
“Considering these factors, the company expects to report pre-tax income
for the second fiscal quarter of 2019 in the range of
“Based on our current budget, capital expenditures for fiscal 2019 are
now expected to be in the
About the Company
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.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.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,” “estimate,” “plan” and “project” and their derivatives, and
include but are not limited to statements about expectations for our
future operations, production levels, sales, profit margins,
profitability, operating income, capital expenditures, working capital
levels, income taxes, SG&A or other expenses, pre-tax income, earnings,
cash flow, and other performance measures, as well as any statements
regarding potential acquisitions, future economic or industry trends or
future developments. 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, as well as our success in finalizing
acquisition negotiations, and integrating acquired businesses.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. Changes in
consumer tastes or preferences toward products not produced by us could
erode demand for our products. Changes in tariffs or trade policy, or
changes in the value of the U.S. dollar versus other currencies could
affect our financial results because a significant portion of our
operations are located outside
CULP, INC. Condensed Financial Highlights (Unaudited) |
||||||||
Three Months Ended | ||||||||
July 29, 2018 |
July 30, 2017 |
|||||||
Net sales | $ | 71,473,000 | $ | 79,533,000 | ||||
Income before income taxes | $ | 1,948,000 | $ | 6,742,000 | ||||
Net income attributable to Culp, Inc. | $ | 957,000 | $ | 4,984,000 | ||||
Net income per share: | ||||||||
Basic | $ | 0.08 | $ | 0.40 | ||||
Diluted | $ | 0.08 | $ | 0.40 | ||||
Average shares outstanding: | ||||||||
Basic | 12,510,000 | 12,399,000 | ||||||
Diluted | 12,600,000 | 12,590,000 |
Adjusted Consolidated Statement of Operations For Three Months Ended July 29, 2018 (Unaudited) |
||||||||||||||
As Reported July 29, 2018 |
(1) Adjustments |
July 29, 2018 Adjusted Results |
||||||||||||
Net Sales | $ | 71,473 | $ | - | $ | 71,473 | ||||||||
Cost of Sales (1) | 60,914 | (1,565 | ) | 59,349 | ||||||||||
Gross Profit | 10,559 | (1,565 | ) | 12,124 | ||||||||||
Selling, general, and administrative expenses | 8,033 | - | 8,033 | |||||||||||
Restructuring expense (1) | 451 | (451 | ) | - | ||||||||||
Income from operations | 2,075 | (2,016 | ) | 4,091 | ||||||||||
Interest expense | 20 | - | 20 | |||||||||||
Interest income | (150 | ) | - | (150 | ) | |||||||||
Other expense | 257 | - | 257 | |||||||||||
Income before income taxes | $ | 1,948 | $ | (2,016 | ) | $ | 3,964 | |||||||
(1) The $1.6 million adjustment for cost of sales represents a restructuring related charge for inventory markdowns. The $451 restructuring charge is for employee termination benefits. Both of these charges are associated with the closure of the company’s Anderson, South Carolina, plant facility. The were no restructuring activities during the three month period ending July 30, 2017. |
Summary of Cash and Investments July 29, 2018, July 30, 2017, and April 29, 2018 (Unaudited) (Amounts in Thousands) |
|||||||||||
Amounts | |||||||||||
July 29, 2018 |
July 30, 2017 |
April 29, 2018 * |
|||||||||
Cash and cash equivalents | $ | 8,593 | $ | 18,322 | $ | 21,228 | |||||
Short-term investments - Available for Sale | - | 2,469 | 2,451 | ||||||||
Short-term investments - Held-To-Maturity | 30,756 | - | 25,759 | ||||||||
Long-term investments - Held-To-Maturity | - | 30,907 | 5,035 | ||||||||
Total cash and investments | $ | 39,349 | $ | 51,698 | $ | 54,473 | |||||
*Derived from audited financial statements. |
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Source:
Culp, Inc.
Investor Contact:
Kenneth R. Bowling, 336-881-5630
Chief
Financial Officer
or
Media Contact:
Teresa A. Huffman,
336-889-5161
Vice President, Human Resources