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

(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):

☐    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

	Page
Item 2.02 – Results of Operations and Financial Condition	3
Item 2.05 - Costs Associated With Exit or Disposal Activities	4
Item 9.01(d) - Exhibits	4
Signatures	5
Exhibits	6

 

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 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 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 14, 2017 for the fiscal year ended April 30, 2017.

Item 2.02 – Results of Operations and Financial Condition

The information set forth in this Item 2.02 of this Current Report, and in Exhibits 99(a) and 99(b), is intended to be “furnished” under Item 2.02 of Form 8-K.  Such information shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.

On June 13, 2018, we issued a news release to announce our financial results for our fourth quarter and year ended April 29, 2018, as well as other matters.  The news release is attached hereto as Exhibit 99(a).

Also on June 13, 2018, we released a Financial Information Release containing additional financial information and disclosures about our fourth quarter and year ended April 29, 2018.  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, less investment in unconsolidated joint venture, plus any proceeds from sales of equipment, plus any proceeds from life insurance policies, less premium payments on our life insurance policy, less payments on vendor-financed capital expenditures, less the purchase of long-term investments associated with our Rabbi Trust, plus proceeds from the sale of long-term investments associated with our Rabbi Trust, 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 are 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 are 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.

The news release and Financial Information Release contain proforma income statement information, which discloses adjusted net income, a non-GAAP measure that eliminates income tax expense associated with the U.S. Income Tax Reform Act (the Tax Act) enacted on December 22, 2017. We have included this proforma information in order to exclude the income tax effects of the Tax Act that are not expected to occur on a regular basis. Details of these calculations and a reconciliation to information from our GAAP financial statements are set forth in the Financial Information Release.  Management believes this presentation is useful to investors in that it aids in the comparison of financial results among comparable financial periods.  However, this information should not be viewed as a substitute for net income calculated in accordance with GAAP. In addition, calculation of the income tax expense associated with the Tax Act involves numerous estimates and assumptions, which we have made in good faith. In order to determine the income tax effects of the Tax Act, estimates were and will be required based on projections of U.S. taxable income, capital expenditures, working capital, employee compensation, cash flow requirements of our U.S. Parent and foreign subsidiaries. Our estimates may change based on actual versus projected results and revisions to our estimates will be recorded during the measurement period allowed by the Securities and Exchange Commission, which is not to extend beyond one year from the enactment date.

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.

 

 

Item 9.01 (d) -- Exhibits

99(a) News Release dated June 13, 2018

99(b) Financial Information Release dated June 13, 2018

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)

 

 

EXHIBIT INDEX

 

	Exhibit Number	Exhibit
	99(a)	News Release dated June 13, 2018
	99(b)	Financial Information Release dated June 13, 2018

 

 

 

6

Exhibit 99(a)

 

 

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 FOURTH QUARTER AND FISCAL 2018

										April 29, 2018
		As Reported								Proforma
		April 29,				(1)				Net of
		2018				Adjustments				Adjustments
Income before income taxes		$	6,466			$	-			$	6,466
Income taxes*			(6,217	)			7,988				1,771
Loss from investment in unconsolidated joint venture			17				-				17
Net income		$	12,666			$	(7,988	)		$	4,678
Net income per share-basic		$	1.02			$	(0.64	)		$	0.38
Net income per share-diluted		$	1.00			$	(0.63	)		$	0.37
Average shares outstanding-basic			12,450				12,450				12,450
Average shares outstanding-diluted			12,611				12,611				12,611

										April 29, 2018
		As Reported								Proforma
		April 29,				(1)				Net of
		2018				Adjustments				Adjustments
Income before income taxes		$	26,883			$	-			$	26,883
Income taxes*			5,740				2,049				7,789
Loss from investment in unconsolidated joint venture			266				-				266
Net income		$	20,877			$	(2,049	)		$	18,828
Net income per share-basic		$	1.68			$	(0.16	)		$	1.51
Net income per share-diluted		$	1.65			$	(0.16	)		$	1.49
Average shares outstanding-basic			12,431				12,431				12,431
Average shares outstanding-diluted			12,633				12,633				12,633

			Amounts
			April 29,					April 30,
			2018					2017*
Cash and cash equivalents		$	21,228				$	20,795
Short-term investments - Available for Sale			2,451					2,443
Short-term investments - Held-To-Maturity			25,759					-
Long-term investments - Held-To-Maturity			5,035					30,945
Total cash and investments		$	54,473				$	54,183
*Derived from audited financial statements.

		Twelve Months Ended April 29, 2018				Twelve Months Ended April 30, 2017
Net cash provided by operating activities		$	27,473			$	34,067
Minus: Capital Expenditures			(8,005	)			(11,858	)
Minus: Investment in unconsolidated joint venture			(661	)			(1,129	)
Minus: Premium payment on life insurance policy			(18	)			(18	)
Plus: Proceeds from the sale of equipment			6				141
Minus: Payments on vendor-financed capital expenditures			(3,750	)			(1,050	)
Plus: Proceeds from the sale of long-term investments (Rabbi Trust)			57				-
Minus: Purchase of long-term investments (Rabbi Trust)			(1,902	)			(1,351	)
Effect of exchange rate changes on cash and cash equivalents			85				(56	)
Free Cash Flow		$	13,285			$	18,746

		Twelve Months				Twelve Months
		Ended				Ended
		April 29, 2018				April 30, 2017
Consolidated income from operations		$	27,461			$	30,078
Average capital employed (2)			108,001				95,055
Return on average capital employed (1)			25.4	%			31.6	%
Average capital employed

		April 29, 2018				January 28, 2018				October 29, 2017				July 30, 2017				April 30, 2017
Total assets		$	217,984			$	216,844			$	201,043			$	207,904			$	205,634
Total liabilities			(54,608	)			(64,662	)			(47,963	)			(58,227	)			(57,004	)
Subtotal		$	163,376			$	152,182			$	153,080			$	149,677			$	148,630
Less:
Cash and cash equivalents			(21,228	)			(22,428	)			(15,739	)			(18,322	)			(20,795	)
Short-term investments - Available for Sale			(2,451	)			(2,472	)			(2,478	)			(2,469	)			(2,443	)
Short-term investments - Held-to-Maturity			(25,759	)			(17,206	)			(4,015	)			-				-
Long-term investments - Held-to-Maturity			(5,035	)			(13,625	)			(26,853	)			(30,907	)			(30,945	)
Long-term investments - Rabbi Trust			(7,326	)			(7,176	)			(6,921	)			(6,714	)			(5,466	)
Deferred income taxes - non-current			(1,458	)			(1,942	)			(491	)			(436	)			(419	)
Income taxes payable - current			1,437				1,580				692				884				287
Income taxes payable - long-term			3,758				10,940				487				487				467
Deferred income taxes - non-current			2,150				2,096				4,641				4,253				3,593
Line of credit			-				-				-				5,000				-
Deferred compensation			7,353				7,216				6,970				6,769				5,520
Total Capital Employed		$	114,817			$	109,165			$	109,373			$	108,222			$	98,429
Average capital employed (2)		$	108,001
		April 30, 2017				January 29, 2017				October 30, 2016				July 31, 2016				May 1, 2016
Total assets		$	205,634			$	191,056			$	179,127			$	183,360			$	175,142
Total liabilities			(57,004	)			(48,742	)			(43,178	)			(51,925	)			(46,330	)
Subtotal		$	148,630			$	142,314			$	135,949			$	131,435			$	128,812
Less:
Cash and cash equivalents			(20,795	)			(15,659	)			(13,910	)			(45,549	)			(37,787	)
Short-term investments - Available for Sale			(2,443	)			(2,410	)			(2,430	)			(2,434	)			(4,359	)
Long-term investments - Held-To-Maturity			(30,945	)			(30,832	)			(31,050	)			-				-
Long-term investments - Rabbi Trust			(5,466	)			(5,488	)			(4,994	)			(4,611	)			(4,025	)
Income taxes receivable			-				-				-				-				(155	)
Deferred income taxes - non-current			(419	)			(422	)			(581	)			(1,942	)			(2,319	)
Income taxes payable - current			287				217				513				358				180
Income taxes payable - long-term			467				1,817				3,734				3,779				3,841
Deferred income taxes - non-current			3,593				2,924				1,699				1,532				1,483
Line of credit			-				-				-				7,000				-
Deferred compensation			5,520				5,327				5,171				5,031				4,686
Total capital employed		$	98,429			$	97,788			$	94,101			$	94,599			$	90,357
Average capital employed (2)		$	95,055

Exhibit 99(b)
Page 1 of 10

 

 

 

CULP, INC. FINANCIAL INFORMATION RELEASE
CONSOLIDATED STATEMENTS OF NET INCOME
FOR THREE MONTHS ENDED April 29, 2018 AND April 30, 2017
(UNAUDITED)
(Amounts in Thousands, Except for Per Share Data)
		THREE MONTHS ENDED
		Amounts												Percent of Sales
		April 29,				April 30				% Over				April 29,				April 30,
		2018				2017				(Under)				2018				2017
Net sales		$	78,184				77,350				1.1	%			100.0	%			100.0	%
Cost of sales			63,424				60,194				5.4	%			81.1	%			77.8	%
Gross profit			14,760				17,156				(14.0	)%			18.9	%			22.2	%
Selling, general and
administrative expenses			8,296				9,986				(16.9	)%			10.6	%			12.9	%
Income from operations			6,464				7,170				(9.8	)%			8.3	%			9.3	%
Interest expense			26				-				100.0	%			0.0	%			0.0	%
Interest income			(143	)			(134	)			6.7	%			(0.2	)%			(0.2	)%
Other expense			115				305				(62.3	)%			0.1	%			0.4	%
Income before income taxes			6,466				6,999				(7.6	)%			8.3	%			9.0	%
Income taxes*			(6,217	)			778			N.M.					(96.1	)%			11.1	%
Loss from investment in unconsolidated joint venture			17				23				(26.1	)%			0.0	%			0.0	%
Net income		$	12,666				6,198				104.4	%			16.2	%			8.0	%
Net income per share-basic		$	1.02			$	0.50				104.0	%
Net income per share-diluted		$	1.00			$	0.49				104.1	%
Average shares outstanding-basic			12,450				12,340				0.9	%
Average shares outstanding-diluted			12,611				12,567				0.4	%

 

---

 

CULP, INC. FINANCIAL INFORMATION RELEASE
PROFORMA CONSOLIDATED INCOME TAXES AND NET INCOME
FOR THREE MONTHS ENDED APRIL 29, 2018
(UNAUDITED)
(Amounts in Thousands, Except for Per Share Data)
						Amounts (2)								Percent of Sales
		As Reported								April 29, 2018				As Reported				April 29, 2018
		April 29,				(1)				Proforma Net				April 29,				Proforma Net
		2018				Adjustments				of Adjustments				2018				of Adjustments
Income before income taxes		$	6,466				-				6,466				8.3	%			8.3	%
Income taxes*			(6,217	)			7,988				1,771				(96.1	)%			27.4	%
Loss from investment in unconsolidated joint venture			17				-				17				0.0	%			0.0	%
Net income		$	12,666				(7,988	)			4,678				16.2	%			6.0	%
Net income per share-basic		$	1.02			$	(0.64	)		$	0.38
Net income per share-diluted		$	1.00			$	(0.63	)		$	0.37
Average shares outstanding-basic			12,450				12,450				12,450
Average shares outstanding-diluted			12,611				12,611				12,611

 

CULP, INC. FINANCIAL INFORMATION RELEASE
PROFORMA CONSOLIDATED INCOME TAXES AND NET INCOME
FOR TWELVE MONTHS ENDED APRIL 29, 2018
(UNAUDITED)
(Amounts in Thousands, Except for Per Share Data)
						Amounts (2)								Percent of Sales
		As Reported								April 29, 2018				As Reported				April 29, 2018
		April 29, 2018				Adjustments(1)				Proforma Net of Adjustments				April 29,   2018				Proforma Net of Adjustments
Income before income taxes		$	26,883				-				26,883				8.3	%			8.3	%
Income taxes*			5,740				2,049				7,789				21.4	%			29.0	%
Loss from investment in unconsolidated joint venture			266				-				266				0.1	%			0.1	%
Net  income		$	20,877				(2,049	)			18,828				6.4	%			5.8	%
Net income per share-basic		$	1.68			$	(0.16	)		$	1.51
Net income per share-diluted		$	1.65			$	(0.16	)		$	1.49
Average shares outstanding-basic			12,431				12,431				12,431
Average shares outstanding-diluted			12,633				12,633				12,633