Culp Announces Cash Strategy and Business Update in Response to Covid-19, Including Sale of eLuxury and Withdrawal of Guidance
- Completing a strategic sale of Culp’s majority interest in eLuxury, LLC to the minority owner of eLuxury in order to increase liquidity and focus on its core businesses during this unprecedented environment. The company will maintain a strong working relationship with eLuxury going forward through supply and royalty arrangements designed to support eLuxury’s ongoing growth strategy and preserve an important sales channel for Culp’s core products;
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Entering an amendment to the company’s existing domestic revolving credit facility with Wells Fargo to increase the borrowing limit, decrease the minimum liquidity level, and extend the expiration date to
August 15, 2022 ;
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Adding to the company’s cash balance by drawing down
$20 million under this domestic revolving credit facility as a precautionary measure to proactively increase balance sheet flexibility during the coronavirus crisis;
- Implementing a temporary salary reduction of 50% for the company’s executive chairman and chief executive officer, as well as other salary reductions for all other executive officers. Additionally, the board of directors will forego the cash portion of its compensation until further notice;
- Furloughing associates as necessary to align with demand and making other workforce adjustments and temporary salary reductions at each of the company’s divisions. While the company will not pay wages to furloughed associates, it will continue to provide certain healthcare-related benefits for those eligible;
- Suspending merit pay increases until further notice;
- Suspending the company’s share repurchase program indefinitely; and
- Aggressively reducing expenses, capital expenditures, and discretionary spending, and working with the company’s vendors and landlords to negotiate temporary terms.
To date, Culp has experienced significant reductions in demand in many of its markets. The company has temporarily closed its facilities in
“We believe these decisions, combined with others we have taken in recent weeks, including repurposing some of our operations to manufacture critical products needed for healthcare and other essential industries, will allow us to weather the COVID-19 market disruption and emerge from the current crisis well-positioned to meet the needs of our customers and execute our strategic plans.
“The specific actions that affect our people are the most difficult decisions we are making, and we realize the impact they will have on these associates and their families, but they are necessary to manage through this unprecedented business interruption. We hope to bring furloughed associates back and fully restore salaries as soon as possible when this crisis lifts. Until then, we will continue to monitor the situation closely and focus on managing our business to conserve cash and maintain balance sheet flexibility. We appreciate the collective efforts and support of our entire team in this trying time,” added Culp.
About the Company
This release contains “forward-looking statements” within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act of 1995 (Section 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934). Such statements are inherently subject to risks and uncertainties that may cause actual events and results to differ materially from such statements. Further, forward looking statements are intended to speak only as of the date on which they are made, and we disclaim any duty to update such statements, except as required by law, to reflect any changes in management’s expectations or any change in the assumptions or circumstances on which such statements are based, whether due to new information, future events, or otherwise. Forward-looking statements are statements that include projections, expectations, or beliefs about future events or results or otherwise are not statements of historical fact. Such statements are often but not always characterized by qualifying words such as “expect,” “believe,” “anticipate,” “estimate,” “plan,” “project,” and their derivatives, and include but are not limited to statements about expectations for our future operations, production levels, new product launches, 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 or liquidity measures, as well as any statements regarding potential acquisitions, future economic or industry trends, or future developments. There can be no assurance that the company will realize these expectations, meet its guidance, or that these beliefs will prove correct.
Factors that could influence the matters discussed in such statements include the level of housing starts and sales of existing homes, consumer confidence, trends in disposable income, and general economic conditions. Decreases in these economic indicators could have a negative effect on our business and prospects. Likewise, increases in interest rates, particularly home mortgage rates, and increases in consumer debt or the general rate of inflation, could affect us adversely. The future performance of our business depends in part on our success in conducting and finalizing acquisition negotiations and integrating acquired businesses into our existing operations. Changes in consumer tastes or preferences toward products not produced by us could erode demand for our products. Changes in tariffs or trade policy, or changes in the value of the
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336-881-5630
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