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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549
 
FORM 8-K

CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported)    March 1, 2016

Culp, Inc.
(Exact Name of Registrant as Specified in its Charter)


North Carolina
  
1-12597
  
56-1001967
(State or Other Jurisdiction
of Incorporation)
  
(Commission File Number)
  
(I.R.S. Employer
Identification No.)

1823 Eastchester Drive
High Point, North Carolina  27265
(Address of Principal Executive Offices)
(Zip Code)

(336) 889-5161
(Registrant’s Telephone Number, Including Area Code)

Not Applicable
(Former name or address, if changed from last report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
 
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 
 
 
 
INDEX

 
Page
Item 2.02 – Results of Operations and Financial Condition
3
Item 9.01(d) - Exhibits 5
Signatures 6
Exhibits
 7
 
 
 
2
 

This report and the exhibits attached hereto contain “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 27A 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, income taxes, SG&A or other expenses, pre-tax income, earnings, cash flow, and other performance measures, as well as any statements regarding 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.  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 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 and 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. 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 Form 10-K filed with the Securities and Exchange Commission on July 17, 2015 for the fiscal year ended May 3, 2015.
 
Item 2.02 – Results of Operations and Financial Condition

On March 1, 2016, we issued a news release to announce our financial results for our third quarter and nine months ended January 31, 2016.  The news release is attached hereto as Exhibit 99(a).

Also on March 1, 2016, we released a Financial Information Release containing additional financial information and disclosures about our third quarter and nine months ended January 31, 2016.  The Financial Information Release is attached hereto as Exhibit 99(b).

The news release and Financial Information Release contain disclosures about free cash flow, a non-GAAP liquidity measure that we define as net cash provided by operating activities, less cash capital expenditures, plus any proceeds from sales of equipment, plus any proceeds from life insurance policies, minus payments on life insurance policies, plus excess tax benefits related to stock-based compensation, minus the purchase of long-term investments, and plus or minus the effects of exchange rate changes on cash and cash equivalents.  Details of these calculations and a reconciliation to information from our GAAP financial statements is set forth in the Financial Information Release.  Management believes the disclosure of free cash flow provides useful information to investors because it measures our available cash flow for potential debt repayment, stock repurchases, dividends, and additions to cash and cash equivalents.  We note, however, that not all of the company’s free cash flow is available for discretionary spending, as we may have mandatory debt payments and other cash requirements that must be deducted from our cash available for future use.  In operating our business, management uses free cash flow to make decisions about what commitments of cash to make for operations, such as capital expenditures (and financing arrangements for these expenditures), purchases of inventory or supplies, SG&A expenditure levels, compensation, and other commitments of cash, while still allowing for adequate cash to meet known future commitments for cash, such as debt repayment, and also for making decisions about dividend payments and share repurchases.

The news release and Financial Information Release contain disclosures about return on capital, both for the entire company and for individual business segments.  We define return on capital as operating income (on an annualized basis if at a point other than the end of the fiscal year) divided by average capital employed.  Operating income excludes certain non-recurring charges, and average capital employed is calculated over rolling two – five fiscal periods, depending on which quarter is being presented.  Details of these calculations and a reconciliation to information from our GAAP financial statements is set forth in the Financial Information Release.  We believe return on capital is an accepted measure of earnings efficiency in relation to capital employed, but it is a non-GAAP performance measure that is not defined or calculated in the same manner by all companies.  This measure should not be considered in isolation or as an alternative to net income or other performance measures, but we believe it provides useful information to investors by comparing the operating income we produce to the asset base used to generate that income.  Also, annualized operating income does not necessarily indicate results that would be expected for the full fiscal year.  We note that, particularly for return on capital measured at the segment level, not all assets and expenses are allocated to our operating segments, and there are assets and expenses at the corporate (unallocated) level that may provide support to a segment’s operations and yet are not included in the assets and expenses used to calculate that segment’s return on capital.  Thus, the average return on capital for the company’s segments will generally be different from the company’s overall return on capital.  Management uses return on capital to evaluate the company’s earnings efficiency and the relative performance of its segments.
 
 
3
 
 
The news release and Financial Information Release contain disclosures about our consolidated adjusted effective income tax rate, which is a non-GAAP liquidity measure that represents our estimated cash expenditures for income taxes.  The consolidated adjusted effective income tax rate is calculated by eliminating the non-cash items that affect our GAAP income tax expense, including adjustments to valuation allowances for deferred tax assets, reductions in income taxes due to net operating loss (NOL) carryforwards, and non-cash foreign income tax expenses.  Currently we do not pay income taxes in the U.S. due to NOL carryforward amounts, and thus the consolidated adjusted effective income tax rate represents income tax expense for our subsidiaries located in China and Canada. A reconciliation of our consolidated adjusted effective income tax rate to our consolidated effective GAAP income tax rate is set forth in the Financial Information Release.  We believe this information is useful to investors because it demonstrates the amount of cash, as a percentage of income before income taxes, expected to be required to fund our income tax liabilities incurred for the periods reported.  Our consolidated income tax expense on a GAAP basis can vary widely over different reporting periods due to the effects of non-cash items, and we believe the calculation of our consolidated adjusted effective tax rate is helpful in comparing financial reporting periods and the amount of income tax liability that we are or will be required to pay to taxing authorities in cash. We also note that, because the consolidated adjusted effective income tax rate used to calculate adjusted net income is based on annualized amounts and estimates, adjusted net income for any quarter or year-to-date period does not necessarily indicate results that could be expected for the full fiscal year. In addition, non-cash reductions in our U.S. NOL carryforwards are based on pre-tax losses in prior periods and will not be available to reduce taxes on current earnings once the NOL carryforward amounts are utilized.  Management uses the consolidated adjusted effective income rate to analyze the effect that income tax expenditures are likely to have on cash balances and overall liquidity.

The news release and Financial Information Release contains disclosures about our adjusted net income, which is a non-GAAP performance measure that incorporates the consolidated adjusted effective income tax rate discussed in the preceding paragraph.  Adjusted net income is calculated by multiplying the consolidated adjusted effective income tax rate by the amount of income before income taxes shown on our income statement.  Because the consolidated adjusted effective income tax rate eliminates non-cash items that affect our GAAP income tax expense, adjusted net income is intended to demonstrate the amount of net income that would be generated by our operations if only the cash portions of our income tax expense are deducted from income before income taxes.  As noted above, our consolidated income tax expense on a GAAP basis can vary widely over different reporting periods due to the effect of non-cash items, and we believe the calculation of adjusted net income is useful to investors because it eliminates these items and aids in the analysis of comparable financial periods by reflecting the amount of earnings available after the deduction of tax liabilities that are paid in cash.  Adjusted net income should not be viewed in isolation by investors and should not be used as a substitute for net income calculated in accordance with GAAP.  We also note that, because the consolidated adjusted effective income tax rate used to calculate adjusted net income is based on annualized amounts and estimates, adjusted net income for any quarter or year-to-date period does not necessarily indicate results that could be expected for the full fiscal year.  In addition, the limitations on the usefulness of consolidated adjusted effective income tax rates described in the preceding paragraph also apply to the usefulness of adjusted net income, since consolidated adjusted effective income tax rates are used to calculate adjusted net income.  Management uses adjusted net income to help it analyze the company’s earnings and performance after taking certain tax matters into account when comparing comparable quarterly and year-to-date periods.

The news release and Financial Information Release contains disclosures about our Adjusted EBITDA, which is a non-GAAP performance measure that reflects net income excluding tax expenses and net interest expense, as well as depreciation and amortization expense and stock based compensation expense.  Details of these calculations and a reconciliation to information from our GAAP financial statements is set forth in the Financial Information Release.  We believe presentation of Adjusted EBITDA is useful to investors because earnings before interest, income taxes, depreciation and amortization, and similar performance measures that exclude certain charges from earnings, are often used by investors and financial analysts in evaluating and comparing companies in our industry.  We note, however, that such measures are not defined uniformly by various companies, with differing expenses being excluded from net income to calculate these performance measures.  For this reason, Adjusted EBITDA should not be viewed in isolation by investors and should not be used as a substitute for net income calculated in accordance with GAAP, nor should it be used for direct comparisons with similarly titled performance measures reported by other companies.  Use of Adjusted EBITDA as an analytical tool has limitations in that this measure does not reflect all expenses that are necessary to fund and operate our business, including funds required to pay taxes, service our debt, and fund capital expenditures, among others.  Management uses Adjusted EBITDA to help it analyze the company’s earnings and operating performance, by excluding the effects of expenses that depend upon capital structure and debt level, tax provisions (which can be volatile for our company as described above), and non-cash items such as depreciation, amortization and stock based compensation expense that do not require immediate uses of cash.

 
4
 

Item 9.01 (d) -- Exhibits

99(a) News Release dated March 1, 2016

99(b) Financial Information Release dated March 1, 2016
 
 
5
 
 
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
    CULP, INC.
    (Registrant)
     
  By: /s/ Kenneth R. Bowling
    Chief Financial Officer
    (principal financial officer)
     
  By: /s/ Thomas B. Gallagher, Jr.
    Corporate Controller
    (principal accounting officer)
 
 
Dated:  March 1, 2016
 
 
6
 
 
EXHIBIT INDEX
 
  Exhibit Number                    Exhibit  
       
  99(a) News Release dated March 1, 2016  
  99(b) Financial Information Release dated March 1, 2016  
 
7
a51288786ex99a.htm
Exhibit 99(a)
 
Logo
 
Investor Contact:
Kenneth R. Bowling
Media Contact:
Teresa A. Huffman
 
Chief Financial Officer
  
Vice President, Human Resources
 
336-881-5630
  
336-889-5161

CULP ANNOUNCES RESULTS FOR THIRD QUARTER FISCAL 2016
Company Declares Regular Quarterly Cash Dividend of $0.07 Per Share

HIGH POINT, N.C. (March 1, 2016) ─ Culp, Inc. (NYSE: CFI) today reported financial and operating results for the third quarter and nine months ended January 31, 2016.

Fiscal 2016 Third Quarter Highlights

 
■
Net sales were $78.5 million, down 3.4 percent, with mattress fabric sales down 3.1 percent and upholstery fabric sales down 3.9 percent, compared with an exceptionally strong sales performance for both divisions in the third quarter last year.

 
■
Pre-tax income was $7.2 million, up 21 percent compared with $5.9 million in the third quarter of fiscal 2015.

 
■
Adjusted net income (non-GAAP) was $5.9 million, or $0.47 per diluted share, for the current quarter, compared with $5.0 million, or $0.40 per diluted share, for the prior year period.  (Adjusted net income is calculated using estimated cash income tax expense.  See the reconciliation to net income on page 7).

 
■
Net income (GAAP) was $4.9 million, or $0.39 per diluted share, compared with net income of $3.8 million, or $0.31 per diluted share, in the prior year period.

 
■
The company purchased 110,776 shares of Culp common stock, representing nearly 1.0 percent of outstanding shares, for $2.4 million at an average price of $23.79 per share.

 
■
The company’s financial position remained strong with cash and cash equivalents and short-term investments of $36.0 million, even after spending $19.6 million in dividends, capital expenditures, debt repayments and share repurchases through the first nine months of fiscal 2016.

Fiscal 2016 Year to Date Highlights

 
■
Year to date net sales were $235.6 million, up 1.9 percent from the same period a year ago, with mattress fabric sales up 4.5 percent and upholstery fabric sales down 1.7 percent over the same period a year ago.

 
■
Pre-tax income was $20.7 million, up 27 percent compared with $16.3 million for the same period last year.

 
■
Adjusted net income (non-GAAP) was $17.0 million, or $1.36 per diluted share, compared with $13.8 million, or $1.11 per diluted share, for the prior year period.

 
■
Net income (GAAP) was $13.3 million, or $1.07 per diluted share, compared with net income of $10.2 million, or $0.82 per diluted share, for the same period a year ago.

 
■
Consolidated return on capital was 32 percent, compared with 27 percent for the same period a year ago.

 
■
Capital expenditures for the year to date period totaled $7.7 million, almost all of which related to the mattress fabrics segment, compared with $8.2 million a year ago.
 
Guidance for Fourth Quarter and Fiscal 2016
 
 
■
The projection for the fourth quarter of fiscal 2016 is for overall sales to be comparable with the previous year’s fourth quarter. Pre-tax income for the fourth quarter of fiscal 2016 is expected to be in the range of $6.7 million to $7.2 million. Pre-tax income for the fourth quarter of fiscal 2015 was $6.7 million.

 
■
The projection for the full year is for overall sales to be slightly higher than last year.

 
■
Pre-tax income for the full year is expected to be $27.5 million to $28.0 million, compared with $23.0 million last fiscal year. The highest annual pre-tax income in the company’s history was the $23.0 million achieved last fiscal year.

 
-MORE-
 
CFI Announces Results for Third Quarter Fiscal 2016
Page 2
March 1, 2016
 
Overview

For the third quarter ended January 31, 2016, net sales were $78.5 million, a 3.4 percent decrease compared with $81.3 million a year ago. The company reported net income of $4.9 million, or $0.39 per diluted share, for the third quarter of fiscal 2016, compared with net income of $3.8 million, or $0.31 per diluted share, for the third quarter of fiscal 2015. Given the volatility in the income tax area during fiscal 2015 and previous years, the company is also reporting adjusted net income (non-GAAP), which is calculated using estimated cash income tax expense for its foreign subsidiaries. (A presentation of adjusted net income and reconciliation to net income is set forth on page 7). The company currently does not incur cash income tax expense in the U.S., nor does it expect to for a few more years, due to approximately $33 million in U.S. net operating loss carryforwards as of the end of fiscal 2015. For the third quarter of fiscal 2016, adjusted net income was $5.9 million, or $0.47 per diluted share, compared with $5.0 million, or $0.40 per diluted share, for the third quarter of fiscal 2015. On a pre-tax basis, the company reported income of $7.2 million compared with pre-tax income of $5.9 million for the third quarter of fiscal 2015.

Commenting on the results, Frank Saxon, president and chief executive officer of Culp, Inc., said, “We continued to drive improvement in our operating performance in the third quarter. While we have achieved higher overall year-over-year sales through the first nine months of fiscal 2016, we did experience a slight drop in the third quarter compared with the prior year period, which was an exceptionally strong sales performance for both businesses. We have remained focused on our top strategic priorities – to drive product innovation and creativity throughout our company and provide a product mix that meets the demands of our customers. Our efficient and flexible manufacturing platform supports this strategy, and we continue to make the right investments to improve our operating efficiencies and overall capacity. Overall, we have seen significant improvement in our profitability this fiscal year. Importantly, we also have the financial strength to support our growth strategy as well as provide added value to shareholders through dividends and share repurchases.”

Mattress Fabric Segment

Mattress fabric sales for the third quarter were $44.3 million, down 3.1 percent compared with $45.7 million for the third quarter of fiscal 2015, while year to date sales were up 4.5 percent.

“While our sales were slightly lower than last year for the third quarter, we have continued to deliver a consistent and strong operating performance in fiscal 2016,” said Iv Culp, president of Culp’s mattress fabrics division. “Our sales for the third quarter were affected by several factors, including a significant weather event at the end of the quarter, which affected our production and shipment schedules. In addition, we experienced a timing difference related to customer roll-outs of new product lines that typically occur in our third quarter as they did the previous year. We expect to recognize that business in the fourth quarter of fiscal 2016 following the Presidents Day holiday mattress promotional events. In spite of these factors, we continued to outpace the overall mattress industry growth, and we are pleased with our ability to respond to changing customer demand trends. Our mirrored manufacturing platform, technical expertise and expanded reactive capacity support our ability to meet this demand with excellent service and delivery performance.

“We are encouraged by the execution of our operating strategy as we continue to realize the benefits of our recent capital investments with increased capacity via newer, more efficient equipment, enhanced finishing capabilities and better overall throughput. As planned, we completed the initial phase of our expansion project in our Canadian location, and we plan to install additional new equipment and make other technological improvements throughout our manufacturing platform during the fourth quarter. These investments demonstrate Culp’s commitment to our customers, and we look forward to the opportunities to drive further operational improvement.

“Design and innovation remain our top priorities to meet customer style preferences and demand trends. As such, we are in the process of enhancing our design services and facilities to further our value proposition. Additionally, we had an excellent showing at the January Las Vegas bedding market, with strong placements, especially in the premium product lines. We are also pleased to see the continued contribution from our mattress cover business. With our complete array of innovative fabrics and mattress covers across all price points, Culp is well positioned for another solid performance in fiscal 2016,” Culp concluded.

 
-MORE-
 
CFI Announces Results for Third Quarter Fiscal 2016
Page 3
March 1, 2016
 
Upholstery Fabric Segment

Sales for this segment were $34.2 million for the third quarter, down 3.9 percent compared with sales of $35.6 million in the third quarter of fiscal 2015. Sales for the year to date period were down 1.7 percent.

“As expected, our sales for the third quarter were slightly lower compared with the same period last year, which was an exceptionally strong quarterly performance for upholstery fabric sales,” noted Boyd Chumbley, executive vice president of Culp’s upholstery fabrics division. “However, we achieved significant improvement in our operating income and margins for the third quarter compared with the prior year period. We continue to benefit from our strategic focus on product innovation and sales diversification. Our changing product mix resulted in greater operating efficiency and capacity utilization in our China cut and sew operation.

“Customer response has been very favorable to our creative designs and diverse range of innovative products. Our flexible global platform supports our marketing efforts and allows us to quickly respond to changing market trends and consumer style preferences. Sales of China produced fabrics accounted for 92 percent of upholstery fabric sales in the third quarter.

“While the short-term outlook is challenging given the current uncertainties in the global economy, we believe we are well positioned for the long-term. An improving U.S. housing market, low interest rates, higher employment rates and lower gasoline prices are all positive economic indicators that support higher consumer spending for home furnishings. As market conditions evolve, we expect to benefit from more favorable demand trends and look forward to the opportunities ahead,” added Chumbley.

Balance Sheet

“Our strong financial position continues to be an important advantage for Culp in fiscal 2016,” added Ken Bowling, chief financial officer of Culp. “As of January 31, 2016, we reported $36.0 million in cash equivalents and short-term investments, even after spending $19.6 million in dividends, capital expenditures, debt repayments and share repurchases through the first nine months of fiscal 2016. We have the financial strength to continue to make the strategic investments to support our growth strategy and return funds to our shareholders.”

Quarterly Dividend and Share Repurchase Program

During the third quarter of fiscal 2016, the company purchased 100,776 shares of Culp common stock, representing nearly one percent of outstanding shares, for $2.4 million at an average price of $23.79 per share, pursuant to the $5.0 million share repurchase program authorized by the Board of Directors in February 2014. This leaves approximately $1.9 million available for additional share repurchases.

Since June 2011, the company has returned a total of $39 million to shareholders in the form of regular quarterly and special dividends and share repurchases.

The company announced that its Board of Directors has approved the payment of a quarterly cash dividend of $0.07 per share. This compares with $0.06 per share paid for the same period last year, reflecting an increase of 17 percent. The dividend is to be paid on or about April 15, 2016, to shareholders of record as of the close of business on April 1, 2016. The $0.07 per share is an annual indicated dividend of $0.28 per share.

Outlook

Commenting on the outlook for the fourth quarter of fiscal 2016, Saxon remarked, “At this time, we expect overall sales to be comparable with the fourth quarter of last fiscal year, which was a strong quarter. For the year, we expect overall fiscal 2016 annual sales to be slightly higher than last year’s annual sales.

“We expect fourth quarter sales in our mattress fabric business to be comparable with the same period a year ago, which was up 10 percent compared to the prior year. Operating income and margins in this segment are expected to be flat to slightly lower than the same period last year.

“For the full fiscal year, we expect mattress fabric sales to be two to four percent higher than fiscal 2015, and operating income and margins are expected to be significantly higher than last fiscal year.

 
-MORE-
 
CFI Announces Results for Third Quarter Fiscal 2016
Page 4
March 1, 2016
 
“In our upholstery fabric business, we expect fourth quarter sales to be comparable with the previous year’s fourth quarter results. We believe the upholstery fabric segment’s operating income and margins will be moderately higher compared with the same quarter of last year.

“For the full fiscal year, we expect upholstery fabric sales to be comparable with last fiscal year.  Operating income and margins in this segment are expected to be substantially higher than last year.

“Considering these factors, the company expects to report pre-tax income for the fourth quarter in the range of $6.7 million to $7.2 million. Pre-tax income for last year’s fourth quarter was $6.7 million. For fiscal 2016 as a whole, we expect pre-tax income in the range of $27.5 million to $28.0 million, compared with $23.0 million last fiscal year, which was the highest level achieved in the company’s history.

“Looking at the full year, capital expenditures for fiscal 2016 are expected to be approximately $12.0 million, mostly related to expansion and efficiency improvement projects for mattress fabrics,” Saxon added. “Additionally, the company expects another good year of free cash flow, even with the anticipated high level of capital expenditures and modest growth in working capital.”

In closing, Saxon remarked, “We are pleased with our ability to consistently execute our strategy in fiscal 2016 with improved profitability in both businesses. We have maintained a strong competitive position with our creative designs, innovative product offerings, and a flexible and scalable global manufacturing platform that supports our ability to deliver these products. At the same time, we have continued to invest for the future to further enhance our operations and provide outstanding service to our global customer base. We look forward to the opportunities ahead for Culp. Above all, we are committed to outstanding performance for our customers as a financially stable and trusted source for innovative fabrics.”

 
-MORE-
 
CFI Announces Results for Third Quarter Fiscal 2016
Page 5
March 1, 2016

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 operations located in the United States, Canada and China.

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 27A 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, income taxes, SG&A or other expenses, pre-tax income, earnings, cash flow, and other performance measures, as well as any statements regarding 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.  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 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 and 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. 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 Form 10-K filed with the Securities and Exchange Commission on July 17, 2015 for the fiscal year ended May 3, 2015. In addition, please note that the company is not responsible for changes made to this release by wire services, internet services, or other media.


 
-MORE-
 
CFI Announces Results for Third Quarter Fiscal 2016
Page 6
March 1, 2016
 
CULP, INC.
Condensed Financial Highlights
(Unaudited)
 
   
Three Months Ended
    
Nine Months Ended
  
   
January 31,
    
February 1,
    
January 31,
    
February 1,
  
   
2016
    
2015
    
2016
    
2015
  
                         
Net sales
   $ 78,466,000     $ 81,269,000     $ 235,607,000     $ 231,320,000  
Income before income taxes
   $ 7,179,000     $ 5,922,000     $ 20,731,000     $ 16,270,000  
Net income
   $ 4,862,000     $ 3,812,000     $ 13,333,000     $ 10,157,000  
Net income per share:
                                
Basic
   $ 0.39     $ 0.31     $ 1.08     $ 0.83  
Diluted
   $ 0.39     $ 0.31     $ 1.07     $ 0.82  
                                 
Adjusted net income
   $ 5,901,000     $ 5,016,000     $ 17,041,000     $ 13,781,000  
Adjusted net income per share
                                
Basic
   $ 0.48     $ 0.41     $ 1.38     $ 1.13  
Diluted
   $ 0.47     $ 0.40     $ 1.36     $ 1.11  
                                 
Average shares outstanding:
                                
Basic
     12,331,000       12,219,000       12,317,000       12,216,000  
Diluted
     12,486,000       12,417,000       12,488,000       12,410,000  
 

Presentation of Adjusted Net Income and Adjusted Income Taxes (1)

   
Three Months Ended
    
Nine Months Ended
  
   
January 31,
    
February 1,
    
January 31,
    
February 1,
  
   
2016
    
2015
    
2016
    
2015
  
                         
Income before income taxes
   $ 7,179,000     $ 5,922,000     $ 20,731,000     $ 16,270,000  
Adjusted income taxes (2)
   $ 1,278,000     $ 906,000     $ 3,690,000     $ 2,489,000  
Adjusted net income
   $ 5,901,000     $ 5,016,000     $ 17,041,000     $ 13,781,000  


(1)
Culp, Inc. currently does not incur cash income tax expense in the U.S. due to its $33.3 million in net operating loss carryforwards as of May 3, 2015.  Adjusted net income is calculated using only estimated cash income tax expense for the company’s subsidiaries in Canada and China.

(2)
Represents estimated cash income tax expense for the company’s subsidiaries in Canada and China, calculated with a consolidated adjusted effective income tax rate of 17.8% for fiscal 2016 and 15.3% for fiscal 2015.
 
 
-MORE-
 
CFI Announces Results for Third Quarter Fiscal 2016
Page 7
March 1, 2016
 
Consolidated Adjusted Effective Income Tax Rate, Net Income and Earnings Per Share
For the Nine Months Ended January 31, 2016, and February 1, 2015
(Unaudited)
(Amounts in Thousands)
 
     
NINE MONTHS ENDED
  
               
      Amounts  
     
January 31,
    
February 1,
  
     
2016
    
2015
  
               
               
Consolidated Effective GAAP Income Tax Rate
 (1)     35.7 %     37.6 %
                   
Non-Cash U.S. Income Tax Expense
       (17.9 )%     (22.1 )%
                   
Non-Cash Foreign Income Tax Expense
       0.0 %     (0.2 )%
                   
Consolidated Adjusted Effective Income Tax Rate
 (2)     17.8 %     15.3 %
 
 
   
THREE MONTHS ENDED
  
   
As reported
    
 
    
January 31, 2016
  
As reported
    
 
    
February 1, 2015
  
   
January 31,
          
Proforma Net
  
February 1,
          
Proforma Net
  
   
2016
    
Adjustments
 
  
of Adjustments
  
2015
    
Adjustments
 
  
of Adjustments
  
                                     
Income before income taxes
   $ 7,179     $ -     $ 7,179     $ 5,922           $ 5,922  
                                               
Income taxes (3)
     2,317     $ (1,039 )     1,278       2,110     $ (1,204 )     906  
Net income
   $ 4,862     $ 1,039     $ 5,901     $ 3,812     $ 1,204     $ 5,016  
                                                 
Net income per share-basic
   $ 0.39     $ 0.08     $ 0.48     $ 0.31     $ 0.10     $ 0.41  
Net income per share-diluted
   $ 0.39     $ 0.08     $ 0.47     $ 0.31     $ 0.10     $ 0.40  
Average shares outstanding-basic
     12,331       12,331       12,331       12,219       12,219       12,219  
Average shares outstanding-diluted
     12,486       12,486       12,486       12,417       12,417       12,417  
                                                 
                                                 
                                                 
   
NINE MONTHS ENDED
  
   
As reported
    
 
    
January 31, 2016
  
As reported
    
 
    
February 1, 2015
  
   
January 31,
          
Proforma Net
  
February 1,
          
Proforma Net
  
    2016    
Adjustments
 
  
of Adjustments
   2015    
Adjustments
 
  
of Adjustments
  
                                                 
Income before income taxes
   $ 20,731     $ -     $ 20,731     $ 16,270     $ -     $ 16,270  
                                                 
Income taxes (3)
     7,398     $ (3,708 )     3,690       6,113     $ (3,624 )     2,489  
Net income
   $ 13,333     $ 3,708     $ 17,041     $ 10,157     $ 3,624     $ 13,781  
                                                 
Net income per share-basic
   $ 1.08     $ 0.30     $ 1.38     $ 0.83     $ 0.30     $ 1.13  
Net income per share-diluted
   $ 1.07     $ 0.30     $ 1.36     $ 0.82     $ 0.29     $ 1.11  
Average shares outstanding-basic
     12,317       12,317       12,317       12,216       12,216       12,216  
Average shares outstanding-diluted
     12,488       12,488       12,488       12,410       12,410       12,410  
 
 
(1) Calculated by dividing consolidated income tax expense  by
      consolidated income before income taxes.
 
(2) Represents estimated cash income tax expense for our subsidiaries located
      in Canada and China divided by consolidated income before income taxes.
 
(3) Proforma income taxes calculated using the Consolidated Adjusted Effective Income Tax Rate as reflected above.
 
 
 
-MORE-
 
CFI Announces Results for Third Quarter Fiscal 2016
Page 8
March 1, 2016
 
Reconciliation of Free Cash Flow
For the Nine Months Ended January 31, 2016, and February 1, 2015
(Unaudited)
(Amounts in thousands)
 
   
Nine Months Ended
    
Nine Months Ended
  
   
January 31, 2016
    
February 1, 2015
  
             
Net cash provided by operating activities
   $ 15,876     $ 20,699  
Minus: Capital Expenditures
     (7,686 )     (8,185 )
Add: Proceeds from the sale of equipment
     230       625  
Add: Proceeds from life insurance policies
     -       320  
Minus: Payments on life insurance policies
     (18 )     (18 )
Minus: Purchase of long-term investments
     (1,268 )     (1,298 )
Add: Excess tax benefits related to stock-based compensation
     822       110  
Effect of exchange rate changes on cash and cash equivalents
     289       (458 )
                 
Free Cash Flow
   $ 8,245     $ 11,795  
 
 
 
-MORE-
 
CFI Announces Results for Third Quarter Fiscal 2016
Page 9
March 1, 2016
 
Reconciliation of Return on Capital
For the Nine Months Ended January 31, 2016, and February 1, 2015
(Unaudited)
(Amounts in thousands)
 
   
Nine Months Ended
          
Nine Months Ended
        
   
January 31, 2016
          
February 1, 2015
        
                         
Consolidated Income from Operations
   $ 20,986           $ 16,222        
Average Capital Employed (2)
     88,275             81,065        
                             
Return on Average Capital Employed (1)
     31.7 %           26.7 %      
                             
Average Capital Employed
                            
                             
   
January 31, 2016
    
November 1, 2015
    
August 2, 2015
    
May 3, 2015
  
                             
Total assets
   $ 173,551     $ 168,947     $ 166,879     $ 171,300  
Total liabilities
     (48,477 )     (45,972 )     (48,154 )     (51,873 )
                                 
Subtotal
   $ 125,074     $ 122,975     $ 118,725     $ 119,427  
Less:
                                
Cash and cash equivalents
     (31,713 )     (31,176 )     (25,933 )     (29,725 )
Short-term investments
     (4,259 )     (6,320 )     (6,336 )     (10,004 )
Long-term investments
     (3,590 )     (3,279 )     (2,893 )     (2,415 )
Income taxes receivable
     (23 )     (75 )     (142 )     (229 )
Deferred income taxes - non-current
     (4,312 )     (3,415 )     (4,405 )     (5,169 )
Current maturities of long-term debt
     -       -       2,200       2,200  
Income taxes payable - current
     622       305       392       325  
Income taxes payable - long-term
     3,480       3,655       3,634       3,792  
Deferred income taxes - non-current
     1,209       1,206       1,071       982  
Deferred compensation
     4,495       4,421       4,280       4,041  
Total Capital Employed
   $ 90,983     $ 88,297     $ 90,593     $ 83,225  
                                 
                                 
Average Capital Employed (2)
   $ 88,275                          
                                 
                                 
   
February 1, 2015
    
November 2, 2014
    
August 3, 2014
    
April 27, 2014
  
                                 
Total assets
   $ 165,358     $ 156,163     $ 154,218     $ 160,928  
Total liabilities
     (50,386 )     (44,489 )     (45,071 )     (49,184 )
                                 
Subtotal
   $ 114,972     $ 111,674     $ 109,147     $ 111,744  
Less:
                                
Cash and cash equivalents
     (28,772 )     (28,953 )     (24,665 )     (29,303 )
Short-term investments
     (8,384 )     (6,318 )     (6,311 )     (6,294 )
Long-term investments
     (2,063 )     (1,911 )     (1,749 )     (765 )
Income taxes receivable
     (104 )     -       (136 )     (121 )
Deferred income taxes - non-current
     (5,020 )     (6,200 )     (7,182 )     (8,263 )
Current maturities of long-term debt
     2,200       2,200       2,200       2,200  
Line of credit
     -       -       569       586  
Income taxes payable - current
     325       268       387       442  
Income taxes payable - long-term
     3,630       3,980       4,037       3,962  
Deferred income taxes - non-current
     927       896       1,019       1,006  
Deferred compensation
     3,934       3,794       3,632       2,644  
Long-term debt, less current maturities
     -       -       2,200       2,200  
Total Capital Employed
   $ 81,645     $ 79,430     $ 83,148     $ 80,038  
                                 
                                 
Average Capital Employed (2)
   $ 81,065                          
 
Notes:
 
(1) Return on average capital employed represents operating income for the nine month period ending January 31, 2016, or February 1, 2015, divided by three quarters times four quarters
      to arrive at an annualized value then divided by average capital employed. Average capital employed does not include cash and cash equivalents, short-term investments,
      long-term investments, long-term debt, including current maturities, line of credit,  noncurrent deferred tax assets and liabilities, income taxes receivable and payable,
      and deferred compensation.
 
(2) Average capital employed used for the nine months ending January 31, 2016, was computed using the four quarterly periods ending January 31, 2016, November 1, 2015, August 2, 2015 and May 3, 2015.
      Average capital employed used for the nine months ending February 1, 2015, was computed using the four quarterly periods ending February 1, 2015, November 2, 2014, August 3, 2014, and April 27, 2014.
 
 
-END-
 
a51288786ex99b.htm
Exhibit 99(b)
Page 1 of 10
 
CULP, INC. FINANCIAL INFORMATION RELEASE
CONSOLIDATED STATEMENTS OF NET INCOME
FOR THREE MONTHS ENDED JANUARY 31, 2016 AND FEBRUARY 1, 2015
(UNAUDITED)
(Amounts in Thousands, Except for Per Share Data)
                               
                               
   
THREE MONTHS ENDED
  
                               
   
Amounts
          
Percent of Sales
  
   
January 31,
    
February 1,
    
% Over
    
January 31,
    
February 1,
  
   
2016
    
2015
    
(Under)
    
2016
    
2015
  
                               
Net sales
   $ 78,466       81,269       (3.4 )%     100.0 %     100.0 %
Cost of sales
     61,903       66,867       (7.4 )%     78.9 %     82.3 %
        Gross profit
     16,563       14,402       15.0 %     21.1 %     17.7 %
                                         
Selling, general and
                                        
  administrative expenses
     9,337       8,375       11.5 %     11.9 %     10.3 %
         Income from operations
     7,226       6,027       19.9 %     9.2 %     7.4 %
                                         
Interest income
     (38 )     (202 )     (81.2 )%     (0.0 )%     (0.2 )%
Other expense
     85       307       (72.3 )%     0.1 %     0.4 %
         Income before income taxes
     7,179       5,922       21.2 %     9.1 %     7.3 %
                                         
Income taxes*
     2,317       2,110       9.8 %     32.3 %     35.6 %
        Net income
   $ 4,862       3,812       27.5 %     6.2 %     4.7 %
                                         
Net income per share-basic
   $ 0.39     $ 0.31       25.8 %                
Net income per share-diluted
   $ 0.39     $ 0.31       25.8 %                
Average shares outstanding-basic
     12,331       12,219       0.9 %                
Average shares outstanding-diluted
     12,486       12,417       0.6 %                
 
 
PRESENTATION OF ADJUSTED NET INCOME, ADJUSTED INCOME TAXES AND EARNINGS PER SHARE (1)
                               
                               
   
THREE MONTHS ENDED
  
                               
   
Amounts
          
Percent of Sales
  
   
January 31,
    
February 1,
    
% Over
    
January 31,
    
February 1,
  
   
2016
    
2015
    
(Under)
    
2016
    
2015
  
                               
                               
Income before income taxes (see above)
   $ 7,179       5,922       21.2 %     9.1 %     7.3 %
                                         
Adjusted Income taxes (2)*
     1,278       906       41.1 %     17.8 %     15.3 %
           Adjusted net income
     5,901       5,016       17.6 %     7.5 %     6.2 %
                                         
Adjusted net income per share-basic
   $ 0.48     $ 0.41       17.1 %                
Adjusted net income per share-diluted
   $ 0.47     $ 0.40       17.5 %                
Average shares outstanding-basic
     12,331       12,219       0.9 %                
Average shares outstanding-diluted
     12,486       12,417       0.6 %                
 
 
(1) Culp, Inc. currently does not incur cash income tax expense in the US due to its $33.3 million in net operating loss carryforwards as of May 3, 2015. Therefore, adjusted net income is calculated using only income tax expense for our subsidiaries located in Canada and China. See reconciliation on page 10 of 10.
 
(2) Represents estimated income tax expense for our subsidiaries located in Canada and China. See reconciliation on page 10 of 10.
 
* Percent of sales column for income taxes is calculated as a % of income before income taxes.
 
 
 
 
 
Page 2 of 10
 
CULP, INC. FINANCIAL INFORMATION RELEASE
CONSOLIDATED STATEMENTS OF NET INCOME
FOR THE NINE MONTHS ENDED JANUARY 31, 2016 AND FEBRUARY 1, 2015
(UNAUDITED)
(Amounts in Thousands, Except for Per Share Data)
                               
                               
   
NINE MONTHS ENDED
  
                               
   
Amounts
          
Percent of Sales
  
   
January 31,
    
February 1,
    
% Over
    
January 31,
    
February 1,
  
   
2016
    
2015
    
(Under)
    
2016
    
2015
  
                               
Net sales
   $ 235,607       231,320       1.9 %     100.0 %     100.0 %
Cost of sales
     187,109       191,925       (2.5 )%     79.4 %     83.0 %
        Gross profit
     48,498       39,395       23.1 %     20.6 %     17.0 %
                                         
Selling, general and
                                        
  administrative expenses
     27,512       23,173       18.7 %     11.7 %     10.0 %
         Income from operations
     20,986       16,222       29.4 %     8.9 %     7.0 %
                                         
Interest expense
     -       50       (100.0 )%     0.0 %     0.0 %
Interest income
     (150 )     (478 )     (68.6 )%     (0.1 )%     (0.2 )%
Other expense
     405       380       6.6 %     0.2 %     0.2 %
         Income before income taxes
     20,731       16,270       27.4 %     8.8 %     7.0 %
                                         
Income taxes*
     7,398       6,113       21.0 %     35.7 %     37.6 %
        Net income
   $ 13,333       10,157       31.3 %     5.7 %     4.4 %
                                         
Net income per share-basic
   $ 1.08     $ 0.83       30.1                  
Net income per share-diluted
   $ 1.07     $ 0.82       30.5                  
Average shares outstanding-basic
     12,317       12,216       0.8                  
Average shares outstanding-diluted
     12,488       12,410       0.6                  
 
 
PRESENTATION OF ADJUSTED NET INCOME, ADJUSTED INCOME TAXES AND EARNINGS PER SHARE (1)
                               
                               
   
NINE MONTHS ENDED
  
                               
   
Amounts
          
Percent of Sales
  
   
January 31,
    
February 1,
    
% Over
    
January 31,
    
February 1,
  
   
2016
    
2015
    
(Under)
    
2016
    
2015
  
                               
                               
Income before income taxes (see above)
   $ 20,731       16,270       27.4 %     8.8 %     7.0 %
                                         
Adjusted Income taxes (2)*
     3,690       2,489       48.3 %     17.8 %     15.3 %
          Adjusted net income
     17,041       13,781       23.7 %     7.2 %     6.0 %
                                         
Adjusted net income per share-basic
   $ 1.38     $ 1.13       22.1 %                
Adjusted net income per share-diluted
   $ 1.36     $ 1.11       22.5 %                
Average shares outstanding-basic
     12,317       12,216       0.8 %                
Average shares outstanding-diluted
     12,488       12,410       0.6 %                
 
(1) Culp, Inc. currently does not incur cash income tax expense in the US due to its $33.3 million in net operating loss carryforwards as of May 3, 2015. Therefore, adjusted net income is calculated using only income tax expense for our subsidiaries located in Canada and China. See reconciliation on page 10 of 10.
 
(2) Represents estimated income tax expense for our subsidiaries located in Canada and China. See reconciliation on page 10 of 10.
 
* Percent of sales column for income taxes is calculated as a % of income before income taxes.
 
 
 
 
 
Page 3 or 10
 
CULP, INC. FINANCIAL INFORMATION RELEASE
CONSOLIDATED BALANCE SHEETS
JANUARY 31, 2016, FEBRUARY 1, 2015, AND MAY 3, 2015
Unaudited
(Amounts in Thousands)
                               
                               
   
Amounts
    
Increase
        
   
January 31,
    
February 1,
    
(Decrease)
    
* May 3,
  
   
2016
    
2015
    
Dollars
    
Percent
    
2015
  
                               
Current assets
                              
Cash and cash equivalents
   $ 31,713       28,772       2,941       10.2 %     29,725  
Short-term investments
     4,259       8,384       (4,125 )     (49.2 )%     10,004  
Accounts receivable
     26,784       30,774       (3,990 )     (13.0 )%     28,749  
Inventories
     48,485       38,013       10,472       27.5 %     42,484  
Income taxes receivable
     23       104       (81 )     (77.9 )%     229  
Other current assets
     2,331       2,992       (661 )     (22.1 )%     2,440  
Total current assets
     113,595       109,039       4,556       4.2 %     113,631  
                                         
Property, plant & equipment, net
     38,157       35,269       2,888       8.2 %     36,078  
Goodwill
     11,462       11,462       -       0.0 %     11,462  
Deferred income taxes
     4,312       5,020       (708 )     (14.1 ) %     5,169  
Long-term Investments
     3,590       2,063       1,527       74.0 %     2,415  
Other assets
     2,435       2,505       (70 )     (2.8 )%     2,545  
                                         
Total assets
   $ 173,551       165,358       8,193       5.0 %     171,300  
                                         
                                         
                                         
Current liabilities
                                        
Current maturities of long-term debt
   $ -       2,200       (2,200 )     (100.0 )%     2,200  
Accounts payable - trade
     25,601       28,644       (3,043 )     (10.6 )%     28,414  
Accounts payable - capital expenditures
     380       772       (392 )     (50.8 )%     990  
Accrued expenses
     12,690       9,954       2,736       27.5 %     11,129  
Income taxes payable - current
     622       325       297       91.4 %     325  
Total current liabilities
     39,293       41,895       (2,602 )     (6.2 )%     43,058  
                                         
Income taxes payable - long-term
     3,480       3,630       (150 )     (4.1 )%     3,792  
Deferred income taxes
     1,209       927       282       30.4 %     982  
Deferred compensation
     4,495       3,934       561       14.3 %     4,041  
                                         
Total liabilities
     48,477       50,386       (1,909 )     (3.8 )%     51,873  
                                         
Shareholders' equity
     125,074       114,972       10,102       8.8 %     119,427  
                                         
Total liabilities and
                                        
shareholders' equity
   $ 173,551       165,358       8,193       5.0 %     171,300  
                                         
Shares outstanding
     12,250       12,219       31       0.3 %     12,219  
 
* Derived from audited financial statements.
 
 
 
 
 
Page 4 of 10
 
CULP, INC. FINANCIAL INFORMATION RELEASE
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JANUARY 31, 2016 AND FEBRUARY 1, 2015
Unaudited
(Amounts in Thousands)
               
               
     
NINE MONTHS ENDED
  
               
     
Amounts
  
     
January 31,
    
February 1,
  
     
2016
    
2015
  
               
Cash flows from operating activities:
        
 
  
 
Net income
   $ 13,333       10,157  
 
Adjustments to reconcile net income to net cash
                
 
provided by operating activities:
                
 
Depreciation
     4,888       4,244  
 
Amortization of other assets
     123       140  
 
Stock-based compensation
     1,964       482  
 
Deferred income taxes
     1,906       3,274  
 
Gain on sale of equipment
     (66 )     (74 )
 
Realized loss on sale of short-term investments
     127       -  
 
Excess tax benefits related to stock-based compensation
     (822 )     (110 )
 
Foreign currency exchange gains
     (85 )     (6 )
 
Changes in assets and liabilities:
                
 
Accounts receivable
     1,091       (3,455 )
 
Inventories
     (6,485 )     2,536  
 
Other current assets
     (108 )     (739 )
 
Other assets
     48       (30 )
 
Accounts payable
     (1,979 )     2,267  
 
Accrued expenses and deferrred compensation
     1,406       2,121  
 
Income taxes
     535       (108 )
 
Net cash provided by operating activities
     15,876       20,699  
                   
Cash flows from investing activities:
                
 
Capital expenditures
     (7,686 )     (8,185 )
 
Proceeds from the sale of equipment
     230       625  
 
Proceeds from life insurance policies
     -       320  
 
Payments on life insurance policies
     (18 )     (18 )
 
Proceeds from the sale of short-term investments
     5,612       1,628  
 
Purchase of short-term investments
     (86 )     (3,719 )
 
Purchase of long-term investments
     (1,268 )     (1,298 )
 
Net cash used in investing activities
     (3,216 )     (10,647 )
                   
Cash flows from financing activities:
                
 
Proceeds from line of credit
     7,000       -  
 
Payments on line of credit
     (7,000 )     (538 )
 
Payments on long-term debt
     (2,200 )     (2,200 )
 
Repurchase of common stock
     (2,397 )     (745 )
 
Dividends paid
     (7,281 )     (6,846 )
 
Payments on debt issuance costs
     (43 )     -  
 
Proceeds from common stock issued
     138       94  
 
Excess tax benefits related to stock-based compensation
     822       110  
 
Net cash used in financing activities
     (10,961 )     (10,125 )
                   
Effect of exchange rate changes on cash and cash equivalents
     289       (458 )
 
                  
Increase (decrease) in cash and cash equivalents
     1,988       (531 )
 
                  
Cash and cash equivalents at beginning of period
     29,725       29,303  
 
                  
Cash and cash equivalents at end of period
   $ 31,713       28,772  
                   
 
                  
Free Cash Flow (1)
   $ 8,245       11,795  
 
                   
(1)  Free Cash Flow reconciliation is as follows:
                
     
FY 2016
    
FY 2015
  
A)
Net cash provided by operating activities
   $ 15,876       20,699  
B)
Minus:  Capital Expenditures
     (7,686 )     (8,185 )
C)
Add:     Proceeds from the sale of equipment
     230       625  
D)
Add:     Proceeds from life insurance policies
     -       320  
E)
Minus:  Payments on life insurance policies
     (18 )     (18 )
F)
Add:     Excess tax benefits related to stock-based compensation
     822       110  
G)
Minus:  Purchase of long-term investments
     (1,268 )     (1,298 )
H)
Effects of exchange rate changes on cash and cash equivalents
     289       (458 )
      $ 8,245       11,795  
                   
 
 
 
 
 
Page 5 of 10
 
CULP, INC. FINANCIAL INFORMATION RELEASE
STATEMENTS OF OPERATIONS BY SEGMENT
FOR THE THREE MONTHS ENDED JANUARY 31, 2016 AND FEBRUARY 1, 2015
(Unaudited)
(Amounts in thousands)
                               
                               
   
THREE MONTHS ENDED
                               
   
Amounts
          
Percent of Total Sales
   
January 31,
    
February 1,
    
% Over
    
January 31,
    
February 1,
  
Net Sales by Segment
  
2016
    
2015
    
(Under)
    
2016
    
2015
  
                               
Mattress Fabrics
   $ 44,277       45,683       (3.1 )%     56.4 %     56.2 %
Upholstery Fabrics
     34,189       35,586       (3.9 )%     43.6 %     43.8 %
                                         
     Net Sales
   $ 78,466       81,269       (3.4 )%     100.0 %     100.0 %
                                         
                                         
Gross Profit by Segment
                          
Gross Profit Margin
                                         
Mattress Fabrics
   $ 8,751       8,076       8.4 %     19.8 %     17.7 %
Upholstery Fabrics
     7,812       6,326       23.5 %     22.8 %     17.8 %
     Gross Profit
   $ 16,563       14,402       15.0 %     21.1 %     17.7 %
                                         
                                         
                                         
Selling, General and Administrative Expenses by Segment
                          
Percent of Sales
  
                                         
Mattress Fabrics
   $ 2,953       2,853       3.5 %     6.7 %     6.2 %
Upholstery Fabrics
     3,963       3,781       4.8 %     11.6 %     10.6 %
Unallocated Corporate expenses
     2,421       1,741       39.1 %     3.1 %     2.1 %
    Selling, General and Administrative Expenses
   $ 9,337       8,375       11.5 %     11.9 %     10.3 %
                                         
                                         
Operating Income (loss) by Segment
                          
Operating Income (Loss) Margin
                                         
Mattress Fabrics
   $ 5,798       5,223       11.0 %     13.1 %     11.4 %
Upholstery Fabrics
     3,849       2,545       51.2 %     11.3 %     7.2 %
Unallocated corporate expenses
     (2,421 )     (1,741 )     39.1 %     (3.1 )%     (2.1 ) %
     Operating income
   $ 7,226       6,027       19.9 %     9.2 %     7.4 %
                                         
                                         
Depreciation by Segment
                                        
                                         
Mattress Fabrics
   $ 1,490       1,244       19.8 %                
Upholstery Fabrics
     215       188       14.4 %                
   Depreciation
   $ 1,705       1,432       19.1 %                
 
 
 
 
 
Page 6 of 10
 
CULP, INC. FINANCIAL INFORMATION RELEASE
STATEMENTS OF OPERATIONS BY SEGMENT
FOR THE NINE MONTHS ENDED JANUARY 31, 2016 AND FEBRUARY 1, 2015
(Unaudited)
(Amounts in thousands)
                               
                               
   
NINE MONTHS ENDED
  
                               
   
Amounts
          
Percent of Total Sales
  
   
January 31,
    
February 1,
    
% Over
    
January 31,
    
February 1,
  
Net Sales by Segment
  
2016
    
2015
    
(Under)
    
2016
    
2015
  
                               
Mattress Fabrics
   $ 137,522       131,543       4.5 %     58.4 %     56.9 %
Upholstery Fabrics
     98,085       99,777       (1.7 )%     41.6 %     43.1 %
                                         
     Net Sales
   $ 235,607       231,320       1.9 %     100.0 %     100.0 %
                                         
                                         
Gross Profit by Segment
                          
Gross Profit Margin
  
                                         
Mattress Fabrics
   $ 28,133       22,603       24.5 %     20.5 %     17.2 %
Upholstery Fabrics
     20,365       16,792       21.3 %     20.8 %     16.8 %
     Gross Profit
   $ 48,498       39,395       23.1 %     20.6 %     17.0 %
                                         
                                         
Selling, General and Administrative Expenses by Segment
                          
Percent of Sales
  
                                         
Mattress Fabrics
   $ 8,865       8,019       10.5 %     6.4 %     6.1 %
Upholstery Fabrics
     11,372       10,518       8.1 %     11.6 %     10.5 %
Unallocated Corporate expenses
     7,275       4,636       56.9 %     3.1 %     2.0 %
     Selling, General, and Administrative Expenses
   $ 27,512       23,173       18.7 %     11.7 %     10.0 %
                                         
                                         
Operating Income (loss)  by Segment
                          
Operating Income (Loss) Margin
  
                                         
Mattress Fabrics
   $ 19,267       14,584       32.1 %     14.0 %     11.1  
Upholstery Fabrics
     8,994       6,274       43.4 %     9.2 %     6.3  
Unallocated corporate expenses
     (7,275 )     (4,636 )     56.9 %     (3.1 )%     (2.0 )%
     Operating income
   $ 20,986       16,222       29.4 %     8.9 %     7.0 %
                                         
                                         
Return on Capital (1)
                                        
                                         
Mattress Fabrics
     35.9 %     30.7 %                        
Upholstery Fabrics
     68.9 %     48.2 %                        
Unallocated Corporate
     N/A     N/A                        
     Consolidated
     31.7 %     26.7 %                        
                                         
Capital Employed (2)
                                        
                                         
Mattress Fabrics
     72,644       65,178       11.5 %                
Upholstery Fabrics
     19,623       16,834       16.6 %                
Unallocated Corporate
     (1,284 )     (367 )     N/A                  
     Consolidated
     90,983       81,645       11.4 %                
                                         
                                         
Depreciation by Segment
                                        
                                         
Mattress Fabrics
   $ 4,273       3,692       15.7 %                
Upholstery Fabrics
     615       552       11.4 %                
   Depreciation
   $ 4,888       4,244       15.2 %                
 
Notes:
 
(1) See pages 8 and 9 of this financial information release for calculations.
 
(2) The capital employed balances are as of January 31, 2016 and February 1, 2015.
 
 
 
 
 
Page 7 of 10
 
   
CULP, INC. FINANCIAL INFORMATION RELEASE
  
   
CONSOLIDATED STATEMENTS OF ADJUSTED EBITDA
  
    FOR THE TWELVE MONTHS ENDED JANUARY 31, 2016 AND FEBRUARY 1, 2015  
    (UNAUDITED)  
    (AMOUNTS IN THOUSANDS)  
                               
                               
                               
   
Quarter Ended
        
                           
Trailing 12
  
                           
Months
  
   
5/3/2015
    
8/2/2015
    
11/1/2015
    
1/31/2016
    
1/31/2016
  
                               
Net income
   $ 4,913     $ 4,701     $ 3,771     $ 4,862     $ 18,247  
Income taxes
     1,772       2,707       2,373       2,317       9,169  
Interest income, net
     (128 )     (42 )     (69 )     (38 )     (277 )
Depreciation and amortization expense
     1,576       1,602       1,668       1,741       6,587  
Stock based compensation
     304       265       1,074       625       2,268  
Adjusted EBITDA
   $ 8,437     $ 9,233     $ 8,817     $ 9,507     $ 35,994  
                                         
                                         
                                         
   
Quarter Ended
          
                                   
Trailing 12
  
                                   
Months
  
   
4/27/2014
    
8/3/2014
    
11/2/2014
    
2/1/2015
  
2/1/2015
  
                                         
Net income
   $ 2,740     $ 3,344     $ 3,001     $ 3,812     $ 12,897  
Income taxes
     1,380       2,115       1,889       2,110       7,494  
Interest income, net
     (43 )     (74 )     (153 )     (202 )     (472 )
Depreciation and amortization expense
     1,394       1,446       1,460       1,478       5,778  
Stock based compensation
     159       46       245       191       641  
Adjusted EBITDA
   $ 5,630     $ 6,877     $ 6,442     $ 7,389     $ 26,338  
                                         
% Over (Under)
     49.9 %     34.3 %     36.9 %     28.7 %     36.7 %
 
 
 
 
 
Page 8 of 10
 
   
CULP, INC. FINANCIAL INFORMATION RELEASE
  
   
RETURN ON CAPITAL EMPLOYED BY SEGMENT
  
   
FOR THE NINE MONTHS ENDED JANUARY 31, 2016
  
   
(Amounts in Thousands)
  
   
(Unaudited)
  
                   
   
Operating Income
  
 
        
   
Nine Months
  
Average
  
Return on
   
Ended
  
Capital
  
Avg. Capital
   
January 31, 2016 (1)
  
Employed (3)
  
Employed (2)
                   
Mattress Fabrics
   $ 19,267     $ 71,492       35.9 %
Upholstery Fabrics
     8,994       17,413       68.9 %
(less: Unallocated Corporate)
     (7,275 )     (631 )     N/A  
Total
   $ 20,986     $ 88,275       31.7 %
 
Average Capital Employed
  
As of the three Months Ended January 31, 2016
 
  
As of the three Months Ended November 1, 2015
    
As of the three Months Ended August 2, 2015
  
   
Mattress
  
Upholstery
  
Unallocated
  
 
    
Mattress
  
Upholstery
  
Unallocated
  
 
    
Mattress
  
Upholstery
  
Unallocated
  
 
  
   
Fabrics
  
Fabrics
  
Corporate
  
Total
  
Fabrics
  
Fabrics
  
Corporate
  
Total
  
Fabrics
  
Fabrics
  
Corporate
  
Total
                                                                         
Total assets
     93,779       33,975       45,797       173,551       90,730       32,187       46,030       168,947       91,614       33,795       41,470       166,879  
Total liabilities
     (21,135 )     (14,352 )     (12,990 )     (48,477 )     (19,228 )     (15,129 )     (11,615 )     (45,972 )     (20,265 )     (14,849 )     (13,040 )     (48,154 )
                                                                                                 
Subtotal
   $ 72,644     $ 19,623     $ 32,807     $ 125,074     $ 71,502     $ 17,058     $ 34,415     $ 122,975     $ 71,349     $ 18,946     $ 28,430     $ 118,725  
Less:
                                                                                                
Cash and cash equivalents
     -       -       (31,713 )     (31,713 )     -       -       (31,176 )     (31,176 )     -       -       (25,933 )     (25,933 )
Short-term investments
     -       -       (4,259 )     (4,259 )     -       -       (6,320 )     (6,320 )     -       -       (6,336 )     (6,336 )
Long-term investments
     -       -       (3,590 )     (3,590 )     -       -       (3,279 )     (3,279 )     -       -       (2,893 )     (2,893 )
Income taxes receivable
     -       -       (23 )     (23 )     -       -       (75 )     (75 )     -       -       (142 )     (142 )
Deferred income taxes - non-current
     -       -       (4,312 )     (4,312 )     -       -       (3,415 )     (3,415 )     -       -       (4,405 )     (4,405 )
Current maturities of long-term debt
     -       -       -       -       -       -       -       -       -       -       2,200       2,200  
Income taxes payable - current
     -       -       622       622       -       -       305       305       -       -       392       392  
Income taxes payable - long-term
     -       -       3,480       3,480       -       -       3,655       3,655       -       -       3,634       3,634  
Deferred income taxes - non-current
     -       -       1,209       1,209       -       -       1,206       1,206       -       -       1,071       1,071  
Deferred compensation
     -       -       4,495       4,495       -       -       4,421       4,421       -       -       4,280       4,280  
                                                                                                 
Total Capital Employed
   $ 72,644     $ 19,623     $ (1,284 )   $ 90,983     $ 71,502     $ 17,058     $ (263 )   $ 88,297     $ 71,349     $ 18,946     $ 298     $ 90,593  
                                                                                                 
                                                                                                 
   
As of the three Months Ended May 3, 2015
 
            
 
                                                  
   
Mattress
  
Upholstery
  
Unallocated
  
 
                                                                  
   
Fabrics
  
Fabrics
  
Corporate
  
Total
                                                                
                                                                                                 
Total assets
     89,066       32,838       49,396       171,300                                                                  
Total liabilities
     (18,594 )     (18,812 )     (14,467 )     (51,873 )                                                                
                                                                                                 
Subtotal
   $ 70,472     $ 14,026     $ 34,929     $ 119,427                                                                  
Less:
                                                                                                
Cash and cash equivalents
     -       -       (29,725 )     (29,725 )                                                                
Short-term investments
     -       -       (10,004 )     (10,004 )                                                                
Long-term investments
     -       -       (2,415 )     (2,415 )                                                                
Income taxes receivable
     -       -       (229 )     (229 )                                                                
Deferred income taxes - non-current
     -       -       (5,169 )     (5,169 )                                                                
Current maturities of long-term debt
     -       -       2,200       2,200                                                                  
Income taxes payable - current
     -       -       325       325                                                                  
Income taxes payable - long-term
     -       -       3,792       3,792                                                                  
Deferred income taxes - non-current
     -       -       982       982                                                                  
Deferred compensation
     -       -       4,041       4,041                                                                  
                                                                                                 
Total Capital Employed
   $ 70,472     $ 14,026     $ (1,273 )   $ 83,225                                                                  
                                                                                                 
                                                                                                 
   
Mattress
  
Upholstery
  
Unallocated
    
 
                                                                  
   
Fabrics
  
Fabrics
  
Corporate
  
Total
                                                                
                                                                                                 
Average Capital Employed (3)
   $ 71,492     $ 17,413     $ (631 )   $ 88,275                                                                  
 
Notes:
 
(1) See reconciliation per page 6 of this financial information release.
 
(2) Return on average capital employed represents operating income for the nine month period ending January 31, 2016 divided by three quarters times four quarters to arrive at an annualized value then divided by average capital employed. Average capital employed does not include cash and cash equivalents, short-term investments, long-term investments, current maturities of long-term debt, noncurrent deferred tax assets and liabilities, income taxes receivable and payable, and deferred compensation.
 
(3) Average capital employed was computed using the four periods ending January 31, 2016, November 1, 2015, August 2, 2015 and May 3, 2015.
 
 
 
 
 
 
Page 9 of 10
 
   
RETURN ON CAPITAL EMPLOYED BY SEGMENT
  
   
FOR THE NINE MONTHS ENDED FEBRUARY 1, 2015
  
   
(Amounts in Thousands)
  
   
(Unaudited)
  
                   
   
Operating Income
  
 
        
   
Nine Months
  
Average
  
Return on
   
Ended
  
Capital
  
Avg. Capital
   
February 1, 2015 (1)
  
Employed (3)
  
Employed (2)
                   
Mattress Fabrics
   $ 14,584     $ 63,361       30.7 %
Upholstery Fabrics
     6,274       17,344       48.2 %
(less: Unallocated Corporate)
     (4,636 )     361       N/A  
Total
   $ 16,222     $ 81,065       26.7 %
 
Average Capital Employed
  
As of the three Months Ended February 1, 2015
  
As of the three Months Ended November 2, 2014
    
As of the three Months Ended August 3, 2014
  
   
Mattress
  
Upholstery
    
Unallocated
  
 
    
Mattress
  
Upholstery
  
Unallocated
  
 
    
Mattress
  
Upholstery
    
Unallocated
  
 
  
   
Fabrics
  
Fabrics
  
Corporate
  
Total
  
Fabrics
  
Fabrics
  
Corporate
  
Total
  
Fabrics
  
Fabrics
  
Corporate
  
Total
                                                                         
Total assets
     83,648       35,761       45,949       165,358       80,121       30,916       45,126       156,163       81,400       30,520       42,298       154,218  
Total liabilities
     (18,470 )     (18,927 )     (12,989 )     (50,386 )     (17,247 )     (14,847 )     (12,395 )     (44,489 )     (18,464 )     (11,468 )     (15,139 )     (45,071 )
                                                                                                 
Subtotal
   $ 65,178     $ 16,834     $ 32,960     $ 114,972     $ 62,874     $ 16,069     $ 32,731     $ 111,674     $ 62,936     $ 19,052     $ 27,159     $ 109,147  
Less:
                                                                                                
Cash and cash equivalents
     -       -       (28,772 )     (28,772 )     -       -       (28,953 )     (28,953 )     -       -       (24,665 )     (24,665 )
Short-term investments
     -       -       (8,384 )     (8,384 )     -       -       (6,318 )     (6,318 )     -       -       (6,311 )     (6,311 )
Long-term investments
     -       -       (2,063 )     (2,063 )                     (1,911 )     (1,911 )                     (1,749 )     (1,749 )
Income taxes receivable
     -       -       (104 )     (104 )     -       -       -       -       -       -       (136 )     (136 )
Deferred income taxes - non-current
     -       -       (5,020 )     (5,020 )     -       -       (6,200 )     (6,200 )     -       -       (7,182 )     (7,182 )
Current maturities of long-term debt
     -       -       2,200       2,200       -       -       2,200       2,200       -       -       2,200       2,200  
Line of credit
     -       -       -       -       -       -       -       -       -       -       569       569  
Income taxes payable - current
     -       -       325       325       -       -       268       268       -       -       387       387  
Income taxes payable - long-term
     -       -       3,630       3,630       -       -       3,980       3,980       -       -       4,037       4,037  
Deferred income taxes - non-current
     -       -       927       927       -       -       896       896       -       -       1,019       1,019  
Long-term debt, less current maturities
     -       -       -       -       -       -       -       -       -       -       2,200       2,200  
Deferred compensation
     -       -       3,934       3,934       -       -       3,794       3,794       -       -       3,632       3,632  
                                                                                                 
Total Capital Employed
   $ 65,178     $ 16,834     $ (367 )   $ 81,645     $ 62,874     $ 16,069     $ 487     $ 79,430     $ 62,936     $ 19,052     $ 1,160     $ 83,148  
 
   
As of the three Months Ended April 27, 2014
    
 
                                                  
   
Mattress
  
Upholstery
    
Unallocated
                                                                      
   
Fabrics
  
Fabrics
  
Corporate
  
Total
                                                                
                                                                                                 
Total assets
     79,055       34,987       46,886       160,928                                                                  
Total liabilities
     (16,598 )     (17,568 )     (15,018 )     (49,184 )                                                                
                                                                                                 
Subtotal
   $ 62,457     $ 17,419     $ 31,868     $ 111,744                                                                  
Less:
                                                                                                
Cash and cash equivalents
     -       -       (29,303 )     (29,303 )                                                                
Short-term investments
     -       -       (6,294 )     (6,294 )                                                                
Long-term investments
    
 
               (765 )     (765 )                                                                
Income taxes receivable
     -       -       (121 )     (121 )                                                                
Deferred income taxes - non-current
     -       -       (8,263 )     (8,263 )                                                                
Current maturities of long-term debt
     -       -       2,200       2,200                                                                  
Line of credit
                     586       586                                                                  
Income taxes payable - current
     -       -       442       442                                                                  
Income taxes payable - long-term
     -       -       3,962       3,962                                                                  
Deferred income taxes - non-current
     -       -       1,006       1,006                                                                  
Long-term debt, less current maturities
     -       -       2,200       2,200                                                                  
Deferred compensation
     -       -       2,644       2,644                                                                  
                                                                                                 
                     Total Capital Employed
   $ 62,457     $ 17,419     $ 162     $ 80,038                                                                  
                                                                                                 
                                                                                                 
                                                                                                 
                                                                                                 
   
Mattress
  
Upholstery
    
Unallocated
    
 
                                                                  
   
Fabrics
  
Fabrics
  
Corporate
  
Total
                                                                
                                                                                                 
Average Capital Employed (3)
   $ 63,361     $ 17,344     $ 361     $ 81,065                                                                  
 
Notes:
(1) See reconciliation per page 6 of this financial information release.
 
(2) Return on average capital employed represents operating income for the nine month period ending February 1, 2015 divided by 3 quarters times 4 quarters  to arrive at an annualized value then divided by average capital employed. Average capital employed does not include cash and cash equivalents, short-term investments, long-term investments, long-term debt, including current maturities, line of credit, noncurrent deferred tax assets and liabilities, and income taxes payable and receivable.
 
(3) Average capital employed was computed using the four periods ending February 1, 2015, November 2, 2014, August 3, 2014 and April 27, 2014.
 
 
 
 
 
Page 10 of 10
 
CULP, INC. FINANCIAL INFORMATION RELEASE
CONSOLIDATED ADJUSTED EFFECTIVE INCOME TAX RATE, NET INCOME AND EARNINGS PER SHARE
FOR THE NINE MONTHS ENDED JANUARY 31, 2016 AND FEBRUARY 1, 2015
Unaudited
(Amounts in Thousands)
                   
                   
                   
                   
                   
          NINE MONTHS ENDED  
                   
          Amounts  
         
January 31,
    
February 1,
  
         
2016
    
2015
  
                   
                   
Consolidated Effective GAAP Income Tax Rate
   (1)       35.7 %     37.6 %
                       
Non-Cash U.S. Income Tax Expense
           (17.9 )%     (22.1 )%
                       
Non-Cash Foreign Income Tax Expense
           0.0 %     (0.2 )%
                       
Consolidated Adjusted Effective Income Tax Rate
   (2)       17.8 %     15.3 %
 
 
   
THREE MONTHS ENDED
   
As reported
          
January 31, 2016
    
As reported
          
February 1, 2015
   
January 31,
          
Proforma Net
    
February 1,
          
Proforma Net
   
2016
    
Adjustments
    
of Adjustments
    
2015
    
Adjustments
  
of Adjustments
                                     
Income before income taxes
   $ 7,179     $ -     $ 7,179     $ 5,922           $ 5,922  
                                               
Income taxes (3)
     2,317     $ (1,039 )     1,278       2,110     $ (1,204 )     906  
Net income
   $ 4,862     $ 1,039     $ 5,901     $ 3,812     $ 1,204     $ 5,016  
                                                 
Net income per share-basic
   $ 0.39     $ 0.08     $ 0.48     $ 0.31     $ 0.10     $ 0.41  
Net income per share-diluted
   $ 0.39     $ 0.08     $ 0.47     $ 0.31     $ 0.10     $ 0.40  
Average shares outstanding-basic
     12,331       12,331       12,331       12,219       12,219       12,219  
Average shares outstanding-diluted
     12,486       12,486       12,486       12,417       12,417       12,417  
                                                 
                                                 
                                                 
   
NINE MONTHS ENDED
   
As reported
            
January 31, 2016
    
As reported
            
February 1, 2015
   
January 31,
            
Proforma Net
    
February 1,
            
Proforma Net
      2016    
Adjustments
    
of Adjustments
       2015    
Adjustments
  
of Adjustments
                                                 
Income before income taxes
   $ 20,731     $ -     $ 20,731     $ 16,270     $ -     $ 16,270  
                                                 
Income taxes (3)
     7,398     $ (3,708 )     3,690       6,113     $ (3,624 )     2,489  
Net income
   $ 13,333     $ 3,708     $ 17,041     $ 10,157     $ 3,624     $ 13,781  
                                                 
Net income per share-basic
   $ 1.08     $ 0.30     $ 1.38     $ 0.83     $ 0.30     $ 1.13  
Net income per share-diluted
   $ 1.07     $ 0.30     $ 1.36     $ 0.82     $ 0.29     $ 1.11  
Average shares outstanding-basic
     12,317       12,317       12,317       12,216       12,216       12,216  
Average shares outstanding-diluted
     12,488       12,488       12,488       12,410       12,410       12,410  
 
(1) Calculated by dividing consolidated income tax expense by consolidated income before income taxes.
 
(2) Represents estimated cash income tax expense for our subsidiaries located in Canada and China divided by consolidated income before income taxes.
 
(3) Proforma income taxes calculated using the Consolidated Adjusted Effective Income Tax Rate as reflected above.