Culp Announces Results for First Quarter Fiscal 2022

September 1, 2021

HIGH POINT, N.C.--(BUSINESS WIRE)--Sep. 1, 2021-- Culp, Inc. (NYSE: CULP) (together with its consolidated subsidiaries, “CULP”) today reported financial and operating results for the first quarter ended August 1, 2021.

Fiscal 2022 First Quarter Financial Summary

Net sales were $83.0 million, up 28.8 percent over the pandemic-impacted prior-year period, with mattress fabrics sales up 19.3 percent and upholstery fabrics sales up 41.0 percent compared with the first quarter of last year.
Income from operations (operating income) was $3.3 million, up 76.2 percent compared with income from operations of $1.9 million for the prior-year period.
Net income was $2.3 million, or $0.18 per diluted share, compared with a net loss of $(2.7) million, or $(0.22) per diluted share, for the prior-year period, which included a $3.7 million non-cash net income tax charge. Excluding this net income tax charge, adjusted net income (non-GAAP) for the first quarter of last year was $1.0 million, or $0.08 per diluted share. (See reconciliation table at the back of this press release.)
The company’s financial position reflected total cash and investments of $44.0 million and no outstanding borrowings as of August 1, 2021. (See summary of cash and investments table at the back of this press release.)
Cash flow from operations and free cash flow were $1.6 million and negative $(782,000), respectively, for the first quarter of fiscal 2022. (See reconciliation table at the back of this press release.)
The company announced a quarterly cash dividend of $0.11 per share, payable in October. At an annual indicated dividend of $0.44 per share, the yield is 3.34 percent, based upon yesterday’s closing stock price of $13.17 per share.
The company repurchased 48,686 shares of Culp common stock during the first quarter of fiscal 2022, and has subsequently repurchased an additional 47,767 shares through August 31, 2021, leaving approximately $3.6 million available under the company’s recently reinstated share repurchase program.

Financial Outlook

Although subject to uncertainties, the company is encouraged by the execution of its product-driven strategy and the resilience of its global platform, as well as its expanding market reach. The financial outlook provided for the second quarter of fiscal 2022 is a sequential comparison to the first quarter of fiscal 2022 due to the current inflationary pressures and volatility that were not present during the prior-year period.
The company’s net sales and consolidated operating income (income from operations) for the second quarter of fiscal 2022 are expected to be comparable to the first quarter of fiscal 2022.
For the full fiscal 2022 year, the company reaffirms its expectations for net sales to continue increasing moderately, with a projected increase between 8 to 12 percent, and for consolidated operating income to increase significantly, with a projected increase between 20 to 25 percent, in each case as compared to fiscal 2021.
The company’s expectations for the second quarter and the full fiscal 2022 year are based on information available at the time of this press release and reflect certain assumptions by management regarding the company’s business and trends. The outlook assumes there will be no further pandemic-related shutdowns and no greater-than-expected changes in freight and raw material costs, foreign currency exchange rates, labor availability, recent consumer trends, world events, or other circumstances beyond the company’s control.

Commenting on the results, Iv Culp, president and chief executive officer of Culp, Inc., said, “We are very pleased to report a solid start to fiscal 2022, with overall sales and operating income in line with expectations and sales reaching their highest first quarter level since fiscal 2003. Our results reflect strong top-line growth driven by higher demand for both our mattress and residential upholstery fabric products. In each of our businesses, we executed our product-driven strategy with a continued emphasis on design creativity and innovation. We also benefited from our expanded market share reach and the continued resilience of our flexible global platform. Despite supply chain disruption and pressures on profitability, we are passionately dedicated to servicing the needs of our customers, and both of our divisions have excelled in utilizing our robust platform and long-term supplier relationships to ensure that we meet our customer commitments.

“While we are optimistic about the ongoing strength of our sales trends, we continue to navigate headwinds relating to rising freight and raw material costs, labor shortages, customers’ supply chain constraints for non-fabric components, and other pandemic-related challenges. Our previously implemented price increases for both of our businesses helped offset certain inflationary pressures and foreign currency fluctuations to some extent during the first quarter. We are now implementing further pricing action in both businesses during the second quarter to assist in covering the rapidly increasing freight, raw material, and labor costs.

“Despite these challenges, we continue to invest in our business and expand our capacity. With our diversified manufacturing and sourcing capabilities, along with our innovative products and digital design strategies, we expect to have additional opportunities to capture market share with new and existing customers. We are also excited about the upcoming opening of our new innovation campus in downtown High Point, North Carolina, which will bring together our most innovative and creative minds and foster collaboration among our businesses. Importantly, we have the financial strength to support our business in the current environment, and we believe we are well positioned for continued growth as market conditions evolve,” added Culp.

Segment Update

Mattress Fabrics Segment

Sales for this segment were $43.1 million for the first quarter, up 19.3 percent compared with sales of $36.1 million in the pandemic-impacted first quarter of fiscal 2021. Sales were up 10.8 percent compared with sales of $38.9 million for the pre-pandemic first quarter of fiscal 2020, which also included an extra week.

“We were encouraged by the strong level of sales during the first quarter,” said Sandy Brown, president of the company’s mattress fabrics division. “Our top line performance was driven by the continued strength of our product offerings and was supplemented by the price increase implemented during the first quarter to help offset certain inflationary pressures. We maintained our focus on customer marketing, product innovation, and creative designs during the quarter, and we further expanded our digital design platform to offer enhanced accessibility for our customers. Additionally, demand trends for sewn mattress covers remained strong, as our on-shore, near-shore, and off-shore supply chain strategy, as well as our fabric-to-cover model, continued to provide a preferred platform that provides customers with the agility and value they need for their business.

“We were also pleased with our improved operating performance for the first quarter of fiscal 2022, as compared to the prior-year period. This improvement primarily reflects our solid increase in sales, somewhat offset by increased raw material prices, freight costs, unfavorable foreign currency fluctuations in Canada and China, and inefficiencies due to labor shortages in the U.S. and Canada. As compared to the fourth quarter of fiscal 2021, our improved operating performance was primarily driven by a favorable product mix and the price increase implemented during the first quarter to help cover expected inflationary pressures, but our results were further affected by operating inefficiencies due to labor shortages and additional increases in freight and raw material costs, particularly during the second half of the quarter. We are implementing a surcharge during the second quarter to help offset these pressures, while also continually engaging in cost control measures. However, this surcharge will not take effect until midway through the quarter, resulting in a temporary cost-price lag that will affect our operating performance during the period.

“Looking ahead, we expect that current inflationary conditions, labor shortages, and other near-term headwinds will continue to impact our business during fiscal 2022, but we are confident in our ability to navigate these challenges. We have a compelling business model that supports a sustainable future and allows us to leverage our efficient global platform, innovative products, creative designs, and digital marketing strategies to enhance our leadership position and increase our market share. As demand trends remain strong, we believe our business is well positioned for the long term,” added Brown.

Upholstery Fabrics Segment

Sales for this segment were $40.0 million for the first quarter, up 41.0 percent compared with sales of $28.4 million in the pandemic-impacted first quarter of fiscal 2021. Sales were up 25.5 percent compared with sales of $31.9 million for the pre-pandemic first quarter of fiscal 2020, which also included an extra week.

“We were pleased by the continued strong growth in our sales for the first quarter,” said Boyd Chumbley, president of the company’s upholstery fabrics division. “This growth was driven by a significant increase in our residential business compared to the prior-year period, and was supplemented by our price increase that was effective during the quarter. We continued to benefit from growth in our market share reach, the flexibility of our Asian platform, and the success of our product innovation strategy, including the ongoing popularity of our LiveSmart® portfolio of products. However, our hospitality business, particularly Read Window Products, remained under significant pressure from the ongoing COVID-19 disruption that continues to affect the travel and leisure industries.

“Despite our top line growth, our operating performance for the first quarter of fiscal 2022, as compared to the prior-year period and as compared to the fourth quarter of fiscal 2021, was negatively affected by the dramatic increase in freight costs and by lower sales in our Read Window Products business, as well as start-up costs for our new Haiti facility. Our operating performance as compared to the prior-year period was also pressured by foreign currency fluctuations in China. Our previously implemented price increase has helped offset foreign currency exchange rate fluctuations to some extent, as intended, but we are implementing an additional freight surcharge during the second quarter to help cover the continued rise in freight costs. We also began to see a growing project backlog in our Read Window Products business during the first quarter, but given the typically longer-term (six to nine month) time frame for project installations, there is a temporary lag between the impact of the pandemic-related disruption and improved results for this business.

“We remain encouraged by the strong backlog in our residential upholstery business, reflecting continued favorable demand. We expect that near-term headwinds, including rising freight and labor costs, customer supply chain constraints, and ongoing pandemic-related disruptions such as quarantine and shutdown requirements currently affecting our sourcing partners in Vietnam, may temporarily pressure our business during fiscal 2022. However, with our flexible Asian platform and the upcoming addition of our new Haiti platform, as well as our long-term supplier relationships and our product-driven strategy, we are confident in our ability to navigate these challenges. We believe we are well positioned to sustain and enhance our competitive advantage over the long term as we continue to deliver innovative products that meet the needs of our customers,” added Chumbley.

Balance Sheet

“Maintaining a strong financial position is one of the company’s top priorities,” added Ken Bowling, executive vice president and chief financial officer of Culp, Inc. “As of August 1, 2021, we reported $44.0 million in total cash and investments and no outstanding debt, compared with $47.4 million in total cash and investments and no outstanding debt at the end of the prior-year period. We generated cash flow from operations of $1.6 million and negative free cash flow of $(782,000) for the first three months of fiscal 2022, compared with cash flow from operations of $10.6 million and free cash flow of $10.0 million for the prior-year period. (See reconciliation table at the back of this press release.) As we continue to invest in our business, our cash flow from operations and free cash flow during the first quarter of fiscal 2022 were affected by increased inventory purchases due to higher sales; capital expenditures, including expenditures for machinery, equipment, and IT investments, as well as expenditures related to our new innovation campus; incentive bonus compensation; and payments for the new building lease associated with our Haiti upholstery cut and sew operation.

“During the first quarter, we invested $2.5 million in the business through capital expenditures and payments associated with our new building lease in Haiti, paid $1.4 million in regular quarterly dividends, and spent $723,000 on share repurchases. While we are very pleased with our solid balance sheet going into the second quarter of fiscal 2022, it is important to note that we will continue to utilize our cash for strategic investments in working capital, planned capital expenditures, and investments in Haiti during this period,” added Bowling.

Dividends and Share Repurchases

The company announced that its Board of Directors has approved the payment of a quarterly cash dividend of 11 cents per share. This compares with 10.5 cents per share paid for the same period last year, reflecting an increase of five percent. At an annual indicated dividend of $0.44 per share, the yield is 3.34 percent, based upon yesterday’s closing stock price of $13.17 per share. The next quarterly payment will be made on October 18, 2021, to shareholders of record as of October 11, 2021.

During the first quarter of fiscal 2022, the company repurchased 48,686 shares of Culp common stock in the open market under its existing share repurchase authorization, and subsequently repurchased an additional 47,767 shares through August 31, 2021, leaving approximately $3.6 million available under the current share repurchase program. Shares may be repurchased under the program, at the company’s discretion, from time to time in the open market or in privately negotiated transactions. Pursuant to its capital allocation strategy, the company seeks to opportunistically repurchase shares at a price that reflects a discount to the company’s calculated intrinsic value per share.

Conference Call

Culp, Inc. will hold a conference call to discuss financial results for the first quarter of fiscal 2022 on September 2, 2021, at 11:00 a.m. Eastern Time. A live webcast of this call can be accessed on the investor relations section of the company’s website, www.culp.com. A replay of the webcast will be available for 30 days on the investor relations section of the company’s website, beginning at 2:00 p.m. Eastern Time on September 2, 2021.

About the Company

Culp, Inc. is one of the world’s largest marketers of mattress fabrics for bedding and upholstery fabrics for residential and commercial furniture. The company markets a variety of fabrics to its global customer base of leading bedding and furniture companies, including fabrics produced at Culp’s manufacturing facilities and fabrics sourced through other suppliers. Culp has manufacturing and sourcing capabilities located in the United States, Canada, China, Haiti, Turkey, and Vietnam.

Forward Looking Statements

This release contains “forward-looking statements” within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act of 1995 (Section 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934). Such statements are inherently subject to risks and uncertainties that may cause actual events and results to differ materially from such statements. Further, forward looking statements are intended to speak only as of the date on which they are made, and we disclaim any duty to update such statements to reflect any changes in management’s expectations or any change in the assumptions or circumstances on which such statements are based, whether due to new information, future events, or otherwise. Forward-looking statements are statements that include projections, expectations, or beliefs about future events or results or otherwise are not statements of historical fact. Such statements are often but not always characterized by qualifying words such as “expect,” “believe,” “anticipate,” “estimate,” “intend,” “plan,” “project,” and their derivatives, and include but are not limited to statements about expectations 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, public health epidemics, or future developments. There can be no assurance that we will realize these expectations or meet our guidance, or that these beliefs will prove correct.

Factors that could influence the matters discussed in such statements include the level of housing starts and sales of existing homes, consumer confidence, trends in disposable income, and general economic conditions. Decreases in these economic indicators could have a negative effect on our business and prospects. Likewise, increases in interest rates, particularly home mortgage rates, and increases in consumer debt or the general rate of inflation, could affect us adversely. The future performance of our business depends in part on our success in conducting and finalizing acquisition negotiations and integrating acquired businesses into our existing operations. Changes in consumer tastes or preferences toward products not produced by us could erode demand for our products. Changes in tariffs or trade policy, or changes in the value of the U.S. dollar versus other currencies, could affect our financial results because a significant portion of our operations are located outside the United States. Strengthening of the U.S. dollar against other currencies could make our products less competitive on the basis of price in markets outside the United States, and strengthening of currencies in Canada and China can have a negative impact on our sales of products produced in those places. Also, economic or political instability in international areas could affect our operations or sources of goods in those areas, as well as demand for our products in international markets. The impact of public health epidemics on employees, customers, suppliers, and the global economy, such as the global coronavirus pandemic currently affecting countries around the world, could also adversely affect our operations and financial performance. In addition, the impact of potential goodwill or intangible asset impairments could affect our financial results. Finally, increases in market prices for petrochemical products can significantly affect the prices we pay for raw materials, and in turn, increase our operating costs and decrease our profitability. Further information about these factors, as well as other factors that could affect our future operations or financial results and the matters discussed in forward-looking statements, is included in Item 1A “Risk Factors” in our most recent Form 10-K and Form 10-Q reports filed with the Securities and Exchange Commission. A forward-looking statement is neither a prediction nor a guarantee of future events or circumstances, and those future events or circumstances may not occur.


CULP, INC.
CONSOLIDATED STATEMENTS OF NET INCOME (LOSS)
FOR THREE MONTHS ENDED AUGUST 1, 2021, AND AUGUST 2, 2020
Unaudited
(Amounts in Thousands, Except for Per Share Data)

	THREE MONTHS ENDED
	Amount									Percent of Sales
				(2)
	August 1,			August 2,			% Over			August 1,			August 2,
	2021			2020			(Under)			2021			2020
Net sales	$	83,047			64,464			28.8	%		100.0	%		100.0	%
Cost of sales		(70,548	)		(54,563	)		29.3	%		84.9	%		84.6	%
Gross profit		12,499			9,901			26.2	%		15.1	%		15.4	%
Selling, general and administrative expenses		(9,181	)		(8,018	)		14.5	%		11.1	%		12.4	%
Income from operations		3,318			1,883			76.2	%		4.0	%		2.9	%
Interest expense		—			(51	)		(100.0	)%		0.0	%		(0.1	)%
Interest income		74			58			27.6	%		0.1	%		0.1	%
Other expense		(237	)		(366	)		(35.2	)%		0.3	%		0.6	%
Income before income taxes		3,155			1,524			107.0	%		3.8	%		2.4	%
Income tax expense (1)		(905	)		(4,324	)		(79.1	)%		28.7	%		283.7	%
Income from investment in unconsolidated joint venture		—			67			(100.0	)%		0.0	%		0.1	%
Net income (loss)		2,250			(2,733	)	N.M.				2.7	%		(4.2	)%

Net income (loss) per share - basic	$	0.18		$	(0.22	)	N.M.
Net income (loss) per share - diluted	$	0.18		$	(0.22	)	N.M.
Average shares outstanding-basic		12,313			12,287			0.2	%
Average shares outstanding-diluted		12,415			12,287			1.0	%

Notes

(1)		Percent of sales column for income tax expense is calculated as a % of income before income taxes.

(2)		See back of this presentation for our Reconciliation of Selected Income Statement Information to Adjusted Results for the three-month period ending August 2, 2020, which includes certain adjustments to income tax expense.


CULP, INC.
CONSOLIDATED BALANCE SHEETS
AUGUST 1, 2021, AUGUST 2, 2020, AND MAY 2, 2021
Unaudited
(Amounts in Thousands)

	Amounts
	(Condensed)		(Condensed)								(Condensed)
	August 1,		August 2,		Increase (Decrease)						* May 2,
	2021		2020		Dollars			Percent			2021
Current assets
Cash and cash equivalents	$	26,061		39,986		(13,925	)		(34.8	)%		37,009
Short-term investments - Held-To-Maturity		1,661		5,092		(3,431	)		(67.4	)%		3,161
Short-term investments - Available for Sale		9,698		983		8,715			886.6	%		5,542
Accounts receivable		35,008		29,893		5,115			17.1	%		37,726
Inventories		58,613		40,402		18,211			45.1	%		55,917
Current income taxes receivable		524		782		(258	)		(33.0	)%		—
Other current assets		3,889		3,547		342			9.6	%		3,852
Total current assets		135,454		120,685		14,769			12.2	%		143,207
Property, plant & equipment, net		43,930		42,051		1,879			4.5	%		44,003
Intangible assets		2,910		3,286		(376	)		(11.4	)%		3,004
Long-term investments - Rabbi Trust		8,841		7,916		925			11.7	%		8,415
Long-term investments - Held-To-Maturity		6,629		1,314		5,315			404.5	%		1,141
Right of use assets		11,447		6,443		5,004			77.7	%		11,730
Deferred income taxes		455		593		(138	)		(23.3	)%		545
Investment in unconsolidated joint venture		—		1,759		(1,759	)		(100.0	)%		—
Other assets		2,582		540		2,042			378.1	%		2,035
Total assets	$	212,248		184,587		27,661			15.0	%		214,080
Current liabilities
Accounts payable - trade		45,285		25,746		19,539			75.9	%		42,540
Accounts payable - capital expenditures		48		333		(285	)		(85.6	)%		348
Operating lease liability - current		2,727		2,387		340			14.2	%		2,736
Deferred revenue		694		685		9			1.3	%		540
Accrued expenses		9,950		7,852		2,098			26.7	%		14,839
Income taxes payable - current		253		613		(360	)		(58.7	)%		229
Total current liabilities		58,957		37,616		21,341			56.7	%		61,232
Accrued expenses - long-term		—		117		(117	)		(100.0	)%		—
Operating lease liability - long-term		6,665		4,214		2,451			58.2	%		6,821
Income taxes payable - long-term		3,365		3,591		(226	)		(6.3	)%		3,326
Deferred income taxes		4,917		5,311		(394	)		(7.4	)%		5,330
Deferred compensation		8,795		7,869		926			11.8	%		8,365
Total liabilities		82,699		58,718		23,981			40.8	%		85,074
Shareholders' equity		129,549		125,869		3,680			2.9	%		129,006
Total liabilities and shareholders' equity	$	212,248		184,587		27,661			15.0	%		214,080
Shares outstanding		12,276		12,292		(16	)		(0.1	)%		12,313

* Derived from audited financial statements.


CULP, INC.
SUMMARY OF CASH AND INVESTMENTS
AUGUST 1, 2021, AUGUST 2, 2020, AND MAY 2, 2021
Unaudited
(Amounts in Thousands)

	Amounts

	August 1,		August 2,		May 2,
	2021		2020		2021*
*Cash and Investments*
Cash and cash equivalents	$	26,061	$	39,986	$	37,009
Short-term investments - Available for Sale		9,698		983		5,542
Short-term investments - Held-To-Maturity		1,661		5,092		3,161
Long-term investments - Held-To-Maturity		6,629		1,314		1,141
Total Cash and Investments	$	44,049	$	47,375	$	46,853

* Derived from audited financial statements.


CULP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED AUGUST 1, 2021, AND AUGUST 2, 2020
Unaudited
(Amounts in Thousands)

	THREE MONTHS ENDED
	Amounts
	August 1,			August 2,
	2021			2020
Cash flows from operating activities:
Net income (loss)	$	2,250		$	(2,733	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation		1,726			1,822
Amortization		121			118
Stock-based compensation		274			126
Deferred income taxes		(323	)		3,693
Income from investment in unconsolidated joint venture		—			(67	)
Foreign currency exchange loss		3			154
Changes in assets and liabilities:
Accounts receivable		2,715			(4,757	)
Inventories		(2,676	)		7,592
Other current assets		(39	)		(1,254	)
Other assets		(556	)		(24	)
Accounts payable		2,723			2,544
Deferred revenue		154			183
Accrued expenses and deferred compensation		(4,336	)		2,377
Income taxes		(465	)		807
Net cash provided by operating activities		1,571			10,581
Cash flows from investing activities:
Capital expenditures		(1,953	)		(500	)
Investment in unconsolidated joint venture		—			(90	)
Proceeds from the sale of short-term investments (Held to Maturity)		1,967			350
Purchase of short-term and long-term investments (Held to Maturity)		(5,973	)		(423	)
Purchase of short-term investments (Available for Sale)		(4,031	)		(34	)
Proceeds from the sale of long-term investments (rabbi trust)		—			39
Purchase of long-term investments (rabbi trust)		(403	)		(78	)
Net cash used in investing activities		(10,393	)		(736	)
Cash flows from financing activities:
Payments associated with lines of credit		—			(30,772	)
Payment associated with Paycheck Protection Program Loan		—			(7,606	)
Dividends paid		(1,356	)		(1,291	)
Common stock repurchased		(723	)		—
Common stock surrendered for withholding taxes payable		(50	)		—
Payments of debt issuance costs		—			(15	)
Net cash used in financing activities		(2,129	)		(39,684	)
Effect of exchange rate changes on cash and cash equivalents		3			35
Decrease in cash and cash equivalents		(10,948	)		(29,804	)
Cash and cash equivalents at beginning of year		37,009			69,790
Cash and cash equivalents at end of period	$	26,061		$	39,986
Free Cash Flow (1)	$	(782	)	$	9,987

Reconciliation of Free Cash Flow (1):

	FY 2022			FY 2021
A) Net cash provided by operating activities	$	1,571			10,581
B) Minus: Capital Expenditures		(1,953	)		(500	)
C) Minus: Investment in unconsolidated joint venture		—			(90	)
D) Plus: Proceeds from the sale of long-term investments (rabbi trust)		—			39
E) Minus: Purchase of long-term investments (rabbi trust)		(403	)		(78	)
F) Effects of exchange rate changes on cash and cash equivalents		3			35
Free Cash Flow	$	(782	)		9,987

CULP, INC.
STATEMENTS OF OPERATIONS BY SEGMENT
FOR THE THREE MONTHS ENDED August 1, 2021, AND AUGUST 2, 2020
Unaudited
(Amounts in Thousands)

	THREE MONTHS ENDED
	Amounts									Percent of Total Sales
	August 1,			August 2,			% Over			August 1,			August 2,
Net Sales by Segment	2021			2020			(Under)			2021			2020
Mattress Fabrics	$	43,058			36,103			19.3	%		51.8	%		56.0	%
Upholstery Fabrics		39,989			28,361			41.0	%		48.2	%		44.0	%
Net Sales	$	83,047			64,464			28.8	%		100.0	%		100.0	%

Gross Profit										Gross Profit Margin
Mattress Fabrics	$	6,795			4,608			47.5	%		15.8	%		12.8	%
Upholstery Fabrics		5,704			5,293			7.8	%		14.3	%		18.7	%
Gross Profit	$	12,499			9,901			26.2	%		15.1	%		15.4	%

Selling, General and Administrative Expenses by Segment										Percent of Sales
Mattress Fabrics	$	3,184			2,763			15.2	%		7.4	%		7.7	%
Upholstery Fabrics		3,437			3,180			8.1	%		8.6	%		11.2	%
Unallocated Corporate expenses		2,560			2,075			23.4	%		3.1	%		3.2	%
Selling, General and Administrative Expenses	$	9,181			8,018			14.5	%		11.1	%		12.4	%

Income from operations by Segment										Operating Income Margin
Mattress Fabrics	$	3,611			1,845			95.7	%		8.4	%		5.1	%
Upholstery Fabrics		2,267			2,113			7.3	%		5.7	%		7.5	%
Unallocated corporate expenses		(2,560	)		(2,075	)		23.4	%		(3.1	)%		(3.2	)%
Income from Operations	$	3,318			1,883			76.2	%		4.0	%		2.9	%

Return on Capital (1)
Mattress Fabrics		19.6	%		5.8	%		237.9	%
Upholstery Fabrics		74.3	%		46.1	%		61.2	%
Unallocated Corporate	N.M.			N.M.			N.M.
Consolidated		15.5	%		4.6	%		237.0	%

Capital Employed (1) (2)
Mattress Fabrics	$	75,118			64,572			16.3	%
Upholstery Fabrics		15,634			17,595			(11.1	)%
Unallocated Corporate		2,258			4,420			(48.9	)%
Consolidated	$	93,010			86,587			7.4	%

Depreciation Expense by Segment
Mattress Fabrics	$	1,521			1,631			(6.7	)%
Upholstery Fabrics		205			191			7.3	%
Depreciation Expense	$	1,726			1,822			(5.3	)%

Notes

(1)		See return on capital pages at the back of this presentation for calculations.

(2)		The capital employed balances are as of August 1, 2021, and August 2, 2020.

CULP, INC.
RECONCILIATION OF SELECTED INCOME STATEMENT INFORMATION TO ADJUSTED RESULTS
FOR THE THREE MONTHS ENDED AUGUST 2, 2020
Unaudited
(Amounts in Thousands, Except for Per Share Data)

	As Reported					August 2, 2020
	August 2,					Adjusted
	2020			Adjustments		Results
Income before income taxes	$	1,524			—		1,524
Income tax expense (1)		(4,324	)		3,691		(633	)
Income from investment in unconsolidated joint venture	67				—		67
Net (loss) income	$	(2,733	)		3,691		958
Net (loss) income per share - basic	$	(0.22	)			$	0.08
Net (loss) income per share - diluted	$	(0.22	)			$	0.08
Average shares outstanding-basic		12,287					12,287
Average shares outstanding-diluted		12,287					12,294

Notes

(1)

The $3.7 million adjustment represents a $7.2 million non-cash income tax charge to record a full valuation allowance against the company’s U.S. net deferred income tax assets, partially offset by a $3.5 million non-cash income tax benefit resulting from the re-establishment of certain U.S. Federal net operating loss carryforwards in connection with U.S. Treasury regulations enacted during our first quarter of fiscal 2020 regarding Global Intangible Low Taxed Income (“GILTI”) tax provisions of the Tax Cuts and Jobs Act of 2017.

CULP, INC.

CONSOLIDATED STATEMENTS OF ADJUSTED EBITDA

FOR THE TWELVE MONTHS ENDED AUGUST 1, 2021, AND AUGUST 2, 2020

Unaudited

(Amounts in Thousands)

Quarter

Ended

Quarter

Ended

Quarter

Ended

Quarter

Ended

Trailing

12 Months

November 1,

January 31,

May 2,

August 1,

2020

2021

Net income

2,384

2,082

1,485

2,250

8,201

Income tax expense

1,613

899

857

905

4,274

Interest income, net

(59

)

(90

)

(36

)

(74

)

(259

)

Gain on bargain purchase

—

(819

)

—

(819

)

Depreciation expense

1,716

1,665

1,643

1,726

6,750

Amortization expense

117

115

116

121

469

Stock based compensation

348

292

485

274

1,399

Adjusted EBITDA

6,119

4,963

3,731

5,202

20,015

% Net Sales

8.0

6.3

4.7

6.3

Quarter

Ended

Quarter

Ended

Quarter

Ended

Quarter

Ended

Trailing

12 Months

November 3,

February 2,

May 3,

August 2,

2019

2020

Net income (loss)

2,192

(4,207

)

(27,825

)

(2,733

)

(32,573

)

Loss before income taxes from

discontinued operation

441

7,824

8,698

—

16,963

Income tax expense (benefit) from

continuing operations

2,279

1,619

(2,237

)

4,324

5,985

Interest income, net

(237

)

(258

)

(37

)

(539

)

Asset impairments from continuing

operations

—

13,712

—

13,712

Restructuring credit

—

(35

)

—

(35

)

Depreciation expense - continuing

operations

1,893

1,891

1,882

1,822

7,488

Amortization expense - continuing

operations

102

117

118

439

Stock based compensation

313

364

(199

)

126

604

Adjusted EBITDA

6,983

7,300

(5,889

)

3,650

12,044

% Net Sales

10.0

10.7

(12.4

5.7

4.8

% Over (Under)

(12.4

(32.0

N.M.

42.5

66.2

CULP, INC.

RETURN ON CAPITAL EMPLOYED BY SEGMENT

FOR THE TWELVE MONTHS ENDED AUGUST 1, 2021

Unaudited

(Amounts in Thousands)

Adjusted

Operating Income

Twelve Months

Average

Return on

Ended

Capital

Avg. Capital

August 2, 2021 (1)

Employed (3)

Employed (2)

Mattress Fabrics

13,564

69,246

19.6

Upholstery Fabrics

12,030

16,195

74.3

Unallocated Corporate

(12,082

)

1,905

N.M.

Total

13,512

87,347

15.5

Average Capital Employed

As of the three Months Ended

August 1, 2021

As of the three Months Ended

May 2, 2021

As of the three Months Ended

January 31, 2021

Mattress

Upholstery

Unallocated

Mattress

Upholstery

Unallocated

Mattress

Upholstery

Unallocated

Fabrics

Corporate

Total

Fabrics

Corporate

Total

Fabrics

Corporate

Total

Total assets (4)

96,416

55,617

60,215

212,248

97,431

54,305

62,344

214,080

91,412

53,233

67,333

211,978

Total liabilities

(21,298

)

(39,983

)

(21,418

)

(82,699

)

(22,410

)

(38,709

)

(23,955

)

(85,074

)

(21,503

)

(38,061

)

(24,052

)

(83,616

)

Subtotal

75,118

15,634

38,797

129,549

75,021

15,596

38,389

129,006

69,909

15,172

43,281

128,362

Cash and cash equivalents

—

(26,061

)

(26,061

)

—

(37,009

)

(37,009

)

—

(35,987

)

(35,987

)

Short-term investments - Available-For-

Sale

—

(9,698

)

(9,698

)

—

(5,542

)

(5,542

)

—

(5,548

)

(5,548

)

Short-term investments - Held-To-

Maturity

—

(1,661

)

(1,661

)

—

(3,161

)

(3,161

)

—

(9,785

)

(9,785

)

Current income taxes receivable

—

(524

)

(524

)

—

Long-term investments - Held-To-Maturity

—

(6,629

)

(6,629

)

—

(1,141

)

(1,141

)

—

(512

)

(512

)

Long-term investments - Rabbi Trust

—

(8,841

)

(8,841

)

—

(8,415

)

(8,415

)

—

(8,232

)

(8,232

)

Deferred income taxes - non-current

—

(455

)

(455

)

—

(545

)

(545

)

—

(640

)

(640

)

Income taxes payable - current

—

253

—

229

—

1,129

Income taxes payable - long-term

—

3,365

—

3,326

—

3,325

Deferred income taxes - non-current

—

4,917

—

5,330

—

5,543

Deferred compensation

—

8,795

—

8,365

—

8,179

Total Capital Employed

75,118

15,634

2,258

93,010

75,021

15,596

(174

)

90,443

69,909

15,172

753

85,834

CULP, INC.

RETURN ON CAPITAL EMPLOYED BY SEGMENT - CONTINUED

FOR THE TWELVE MONTHS ENDED AUGUST 1, 2021

Unaudited

(Amounts in Thousands)

As of the three Months Ended November 1, 2020

As of the three Months Ended August 2, 2020

Mattress

Upholstery

Unallocated

Mattress

Upholstery

Unallocated

Fabrics

Corporate

Total

Fabrics

Corporate

Total

Total assets (4)

83,237

47,267

72,272

202,776

79,016

41,239

64,332

184,587

Total liabilities

(21,628

)

(30,287

)

(23,610

)

(75,525

)

(14,444

)

(23,644

)

(20,630

)

(58,718

)

Subtotal

61,609

16,980

48,662

127,251

64,572

17,595

43,702

125,869

Cash and cash equivalents

—

(45,288

)

(45,288

)

—

(39,986

)

(39,986

)

Short-term investments - Available-For-

Sale

—

(5,462

)

(5,462

)

—

(983

)

(983

)

Short-term investments - Held-To-

Maturity

—

(5,005

)

(5,005

)

—

(5,092

)

(5,092

)

Current income taxes receivable

—

(782

)

(782

)

Long-term investments - Held-To-Maturity

—

(759

)

(759

)

—

(1,314

)

(1,314

)

Long-term investments - Rabbi Trust

—

(8,060

)

(8,060

)

—

(7,916

)

(7,916

)

Deferred income taxes - non-current

—

(645

)

(645

)

—

(593

)

(593

)

Income taxes payable - current

—

1,413

—

613

Income taxes payable - long-term

—

3,325

—

3,591

Deferred income taxes - non-current

—

6,089

—

5,311

Deferred compensation

—

8,000

—

7,869

Total Capital Employed

61,609

16,980

2,270

80,859

64,572

17,595

4,420

86,587

Mattress

Upholstery

Unallocated

Fabrics

Corporate

Total

Average Capital Employed (3)

69,246

16,195

1,905

87,347

Notes

(1)		See last page of this presentation for calculation.
(2)		Return on average capital employed represents the last twelve months operating income as of August 1, 2021, divided by average capital employed. Average capital employed does not include cash and cash equivalents, short-term investments Available-For-Sale, and short-term and long-term investments Held-To-Maturity, long-term investments – Rabbi Trust, income taxes receivable and payable, noncurrent deferred income tax assets and liabilities, and deferred compensation.
(3)		Average capital employed was computed using the five quarterly periods ending August 1, 2021, May 2, 2021, January 31, 2021, November 1, 2020, and August 2, 2020.
(4)		Intangible assets are included in unallocated corporate for all periods presented and therefore, have no effect on capital employed and return on capital employed for our mattress fabrics and upholstery fabrics segments.

CULP INC.

RETURN ON CAPITAL EMPLOYED BY SEGMENT

FOR THE TWELVE MONTHS ENDED AUGUST 2, 2020

Unaudited

(Amounts in Thousands)

Adjusted

Operating Income

Twelve Months

Average

Return on

Ended

Capital

Avg. Capital

August 2, 2020 (1)

Employed (3)

Employed (2)

Mattress Fabrics

4,153

71,209

5.8

Upholstery Fabrics

9,106

19,758

46.1

Unallocated Corporate

(8,560

)

10,180

N.M.

Total

4,699

101,146

4.6

Average Capital Employed

As of the three Months

Ended August 2, 2020

As of the three Months

Ended May 3, 2020

As of the three Months

Ended February 2, 2020

Mattress

Upholstery

Unallocated

Mattress

Upholstery

Unallocated

Mattress

Upholstery

Unallocated

Fabrics

Corporate

Total

Fabrics

Corporate

Total

Fabrics

Corporate

Total

Total assets (4)

79,016

41,239

64,332

184,587

82,060

38,517

94,507

215,084

88,641

42,248

81,251

212,140

Total liabilities (5)

(14,444

)

(23,644

)

(20,630

)

(58,718

)

(9,239

)

(20,908

)

(55,239

)

(85,386

)

(11,586

)

(18,179

)

(22,279

)

(52,044

)

Subtotal

64,572

17,595

43,702

125,869

72,821

17,609

39,268

129,698

77,055

24,069

58,972

160,096

Cash and cash equivalents

—

(39,986

)

(39,986

)

—

(69,790

)

(69,790

)

—

(21,640

)

(21,640

)

Short-term investments - Available-For-Sale

—

(983

)

(983

)

—

(923

)

(923

)

—

(7,580

)

(7,580

)

Short-term investments - Held-To-Maturity

—

(5,092

)

(5,092

)

—

(4,271

)

(4,271

)

—

(3,171

)

(3,171

)

Current income taxes receivable

—

(782

)

(782

)

—

(1,585

)

(1,585

)

—

(776

)

(776

)

Current assets - Discontinued Operation

—

(4,738

)

(4,738

)

Long-term investments - Held-To-Maturity

—

(1,314

)

(1,314

)

—

(2,076

)

(2,076

)

—

(2,224

)

(2,224

)

Long-term investments - Rabbi Trust

—

(7,916

)

(7,916

)

—

(7,834

)

(7,834

)

—

(7,804

)

(7,804

)

Noncurrent income taxes receivable

—

(733

)

(733

)

Deferred income taxes - non-current

—

(593

)

(593

)

—

(793

)

(793

)

—

(920

)

(920

)

Long-term note receivable affiliated with

discontinued operation

—

(1,800

)

(1,800

)

Noncurrent assets - Discontinued Operation

—

(9,241

)

(9,241

)

Line of credit - China operations

—

1,015

—

Paycheck Protection Program Loan

—

7,606

—

Current liabilities - Discontinued Operation

—

2,094

Income taxes payable - current

—

613

—

395

—

455

Line of credit - U.S. operations

—

29,750

—

Income taxes payable - long-term

—

3,591

—

3,796

—

3,442

Deferred income taxes - non-current

—

5,311

—

1,818

—

2,013

Deferred compensation

—

7,869

—

7,720

—

7,637

Noncurrent liabilities - Discontinued Operation

—

3,501

Non-controlling interest - Discontinued Operation

—

(253

)

(253

)

Total Capital Employed

64,572

17,595

4,420

86,587

72,821

17,609

4,096

94,526

77,055

24,069

17,234

118,358

CULP INC.

RETURN ON CAPITAL EMPLOYED BY SEGMENT - CONTINUED

FOR THE TWELVE MONTHS ENDED AUGUST 2, 2020

Unaudited

(Amounts in Thousands)

As of the three Months Ended November 3, 2019

As of the three Months Ended August 4, 2019

Mattress

Upholstery

Unallocated

Mattress

Upholstery

Unallocated

Fabrics

Corporate

Total

Fabrics

Corporate

Total

Total assets (4)

84,473

43,313

105,736

233,522

83,056

40,456

102,735

226,247

Total liabilities (5)

(14,079

)

(23,902

)

(29,619

)

(67,600

)

(11,852

)

(20,352

)

(29,707

)

(61,911

)

Subtotal

70,394

19,411

76,117

165,922

71,204

20,104

73,028

164,336

Cash and cash equivalents

—

(46,955

)

(46,955

)

—

(44,236

)

(44,236

)

Current income taxes receivable

—

(776

)

(776

)

—

(776

)

(776

)

Current assets - Discontinued Operation

—

(4,760

)

(4,760

)

—

(3,557

)

(3,557

)

Long-term investments - Rabbi Trust

—

(7,575

)

(7,575

)

—

(7,347

)

(7,347

)

Noncurrent income taxes receivable

—

(733

)

(733

)

—

(733

)

(733

)

Deferred income taxes - non-current

—

(511

)

(511

)

—

(486

)

(486

)

Long-term note receivable affliated with

discontinued operation

—

(1,800

)

(1,800

)

—

(1,800

)

(1,800

)

Noncurrent assets - Discontinued Operation

—

(22,950

)

(22,950

)

—

(23,058

)

(23,058

)

Current liabilities - Discontinued Operation

—

1,907

—

1,431

Income taxes payable - current

—

1,539

—

1,116

Contingent consideration affiliated with

discontinued operation

—

6,006

—

5,931

Income taxes payable - long-term

—

3,442

—

3,640

Deferred income taxes - non-current

—

3,283

—

2,543

Deferred compensation

—

7,429

—

7,232

Noncurrent liabilities - Discontinued Operation

—

3,550

—

3,599

Non-controlling interest - Discontinued Operation

—

(4,402

)

(4,402

)

—

(4,190

)

(4,190

)

Total Capital Employed

70,394

19,411

12,811

102,616

71,204

20,104

12,337

103,645

Mattress

Upholstery

Unallocated

Fabrics

Corporate

Total

Average Capital Employed (3)

71,209

19,758

10,180

101,146

Notes

(1)		See last page of this presentation for calculation.
(2)		Return on average capital employed represents the last twelve months operating income as of August 1, 2021, divided by average capital employed. Average capital employed does not include cash and cash equivalents, short-term investments Available-For-Sale, and short-term and long-term investments Held-To-Maturity, long-term investments – Rabbi Trust, income taxes receivable and payable, noncurrent deferred income tax assets and liabilities, deferred compensation, lines of credit associated with our U.S. and China operations, Paycheck Protection Program loan, long-term note receivable affiliated with discontinued operation, current and noncurrent assets – Discontinued Operation, current and non-current liabilities- Discontinued Operation, contingent consideration affiliated with discontinued operation, and non-controlling interest- Discontinued Operation.
(3)		Average capital employed was computed using the five quarterly periods ending August 2, 2020, May 3, 2020, February 2, 2020, November 2, 2019, and August 4, 2019.
(4)		Intangible assets and goodwill are included in unallocated corporate for all periods presented and therefore, have no effect on capital employed and return on capital employed for our mattress fabrics and upholstery fabrics segments.
(5)		Accrued restructuring costs and certain obligations associated with an acquisition are included in unallocated corporate for all periods presented and therefore, have no effect on capital employed and return on capital employed for our mattress fabrics and upholstery fabrics segments.

CULP INC.

CONSOLIDATED STATEMENTS OF ADJUSTED OPERATING INCOME (LOSS)

FOR THE TWELVE MONTHS ENDED AUGUST 1, 2021, AND AUGUST 2, 2020

Unaudited

(Amounts in Thousands)

Quarter Ended

Trailing 12

Months

11/1/2020

1/31/2021

5/2/2021

8/1/2021

Mattress Fabrics

4,382

3,297

2,274

3,611

13,564

Upholstery Fabrics

3,287

3,863

2,613

2,267

12,030

Unallocated Corporate

(3,151

)

(3,123

)

(3,248

)

(2,560

)

(12,082

)

Operating income

4,518

4,037

1,639

3,318

13,512

Quarter Ended

Trailing 12

Months

11/3/2019

2/2/2020

5/3/2020

8/2/2020

Mattress Fabrics

3,294

1,778

(2,764

)

1,845

4,153

Upholstery Fabrics

3,473

3,030

490

2,113

9,106

Unallocated Corporate

(2,358

)

(2,119

)

(2,008

)

(2,075

)

(8,560

)

Subtotal

4,409

2,689

(4,282

)

1,883

4,699

Asset Impairments

—

(13,712

)

—

(13,712

)

Restructuring credit

—

Operating income

4,409

2,724

(17,994

)

1,883

(8,978

)

% Over (Under)

2.5

48.2

(109.1

76.2

(250.5

View source version on businesswire.com: https://www.businesswire.com/news/home/20210901005970/en/

Investor Contact:
Kenneth R. Bowling
Chief Financial Officer
336-881-5630

Media Contact:
Teresa A. Huffman
Senior Vice President, Human Resources
336-889-5161

Source: Culp, Inc.