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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Culp Inc | NYSE:CULP | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.02 | 0.45% | 4.44 | 4.49 | 4.40 | 4.48 | 14,016 | 01:00:00 |
Culp, Inc. (NYSE: CULP) (together with its consolidated subsidiaries, “CULP”) today reported financial and operating results for the second quarter ended October 29, 2023.
Fiscal 2024 Second Quarter Financial Summary
CEO Commentary
Commenting on the results, Iv Culp, president and chief executive officer of Culp, Inc., said, “We are pleased to report both sequential and year-over-year improvement in our consolidated sales and operating performance for the second quarter, a solid outcome considering the challenging macro environment for furniture and bedding. These results, which were in line with our expectations, reflect the strategic business transformation initiatives underway in both divisions that are focused on driving performance despite ongoing demand softness. In our mattress fabrics segment, we are increasing sales and gaining market position with new fabric and sewn cover placements. This segment also achieved a 90 percent improvement in its operating results as compared to the prior-year period, and a 33 percent improvement as compared sequentially to the prior quarter. This performance was driven by balanced inventory management, higher sales, better pricing and margin, and an ongoing focus by our strengthened leadership team on operational efficiencies across our locations. For our upholstery fabrics segment, as expected, sales for residential fabrics were lower than the prior-year period due to demand softness affecting the home furnishings industry. However, demand remained solid in our hospitality/contract business. The segment also saw a significant improvement in operating performance, driven by better inventory management, fixed cost savings, and other operational improvements.
“Additionally, we continued our focus on prudent financial management, including maintaining a strong balance sheet and ensuring a strategic level of working capital. We ended the quarter with $15.2 million in cash and no outstanding borrowings. We believe we are well positioned, and we are strategically investing in our business, especially within our mattress fabrics segment, to support future profitable sales growth and further improve operating efficiencies.
“As we enter the third quarter, we acknowledge that the various external headwinds and pressures on consumer spending for furniture and bedding products may remain for some time. However, our market position is strong and growing, and we are diligently focused on internal improvement initiatives that will enable us to withstand these industry conditions and position our business for renewed growth and profitability. Regardless of the current demand backdrop, we expect to continue on a path of sequential and year-over-year operating improvement, including a return to positive adjusted EBITDA in the third quarter. We also believe we are poised to return to consolidated operating profitability by the end of the fiscal year. We are well positioned with our innovative product offerings, creative designs, resilient global manufacturing and sourcing platform, strong leadership teams, and focused financial management. These hallmarks of our business will support us into the future, especially when market conditions improve,” added Culp.
Business Segment Highlights
Mattress Fabrics Segment (“CHF”) Summary
Upholstery Fabrics Segment (“CUF”) Summary
Balance Sheet, Cash Flow, and Liquidity
Share Repurchases
The company did not repurchase any shares during the second quarter of fiscal 2024, leaving approximately $3.2 million available under the current share repurchase program as of October 29, 2023. Despite the current share repurchase authorization, the company does not expect to repurchase any shares during the third quarter of fiscal 2024.
Financial Outlook
Conference Call
Culp, Inc. will hold a conference call to discuss financial results for the second quarter of fiscal 2024 on December 5, 2023, at 11:00 a.m. Eastern Time. A live webcast of this call can be accessed on the “Upcoming Events” section on the investor relations page of the company’s website, www.culp.com. A replay of the webcast will be available for 30 days under the “Past Events” section on the investor relations page of the company’s website, beginning at 2:00 p.m. Eastern Time on December 5, 2023.
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, projections, or trends for our future operations, strategic initiatives and plans, production levels, new product launches, sales, profit margins, profitability, operating income, capital expenditures, working capital levels, cost savings, 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 dividends, share repurchases, liquidity, use of cash and cash requirements, borrowing capacity, investments, 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, including changes in U.S. trade enforcement priorities, 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. In addition, because our foreign operations use the U.S. dollar as their functional currency, changes in the exchange rate between the local currency of those operations and the U.S dollar can affect our reported profits from those foreign operations. 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 asset impairments, including impairments of property, plant, and equipment, inventory, or intangible assets, as well as the impact of valuation allowances applied against our net deferred income tax assets, could affect our financial results. Increases in freight costs, labor costs, and raw material prices, including increases in market prices for petrochemical products, can also significantly affect the prices we pay for shipping, labor, and raw materials, respectively, and in turn, increase our operating costs and decrease our profitability. Finally, disruption in our customers’ supply chains for non-fabric components may cause declines in new orders and/or delayed shipping of existing orders while our customers wait for other components, which could adversely affect our financial results. 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. Additional risks and uncertainties that we do not presently know about or that we currently consider to be immaterial may also affect our business operations and financial results.
CULP, INC.
CONSOLIDATED STATEMENTS OF NET LOSS
FOR THREE MONTHS ENDED OCTOBER 29, 2023, AND OCTOBER 30, 2022
Unaudited
(Amounts in Thousands, Except for Per Share Data)
THREE MONTHS ENDED
Amount
Percent of Sales
(1)
(1)
October 29,
October 30,
% Over
October 29,
October 30,
2023
2022
(Under)
2023
2022
Net sales
$
58,725
$
58,381
0.6
%
100.0
%
100.0
%
Cost of sales (2)(3)
(50,775
)
(60,594
)
(16.2
)%
86.5
%
103.8
%
Gross profit (loss)
7,950
(2,213
)
(459.2
)%
13.5
%
(3.8
)%
Selling, general and administrative expenses
(10,045
)
(9,103
)
10.3
%
17.1
%
15.6
%
Restructuring expense (4) (5)
(144
)
(615
)
(76.6
)%
0.2
%
1.1
%
Loss from operations
(2,239
)
(11,931
)
(81.2
)%
(3.8
)%
(20.4
)%
Interest income
282
79
257.0
%
0.5
%
0.1
%
Other income
49
829
(94.1
)%
0.1
%
1.4
%
Loss before income taxes
(1,908
)
(11,023
)
(82.7
)%
(3.2
)%
(18.9
)%
Income tax expense (6)
(516
)
(1,150
)
(55.1
)%
(27.0
)%
(10.4
)%
Net loss
$
(2,424
)
$
(12,173
)
(80.1
)%
(4.1
)%
(20.9
)%
Net loss per share - basic
$
(0.19
)
$
(0.99
)
(80.4
)%
Net loss per share - diluted
$
(0.19
)
$
(0.99
)
(80.4
)%
Average shares outstanding-basic
12,456
12,280
1.4
%
Average shares outstanding-diluted
12,456
12,280
1.4
%
Notes (1)
See page 12 for our Reconciliation of Selected Income Statement Information to Adjusted Results for the three months ending October 29, 2023, and October 30, 2022.
(2)
Cost of sales for the three months ending October 29, 2023, includes a restructuring related credit totaling $78,000 for the gain on disposal inventory related to the discontinuation of production of cut and sewn upholstery kits at our facility in Ouanaminthe, Haiti.
(3)
Cost of sales for the three months ending October 30, 2022, includes a restructuring related charge totaling $98,000, which pertains to loss on disposal and markdowns of inventory related to the exit of our cut and sew upholstery fabrics operation located in Shanghai, China.
(4)
Restructuring expense for the three months ending October 29, 2023, represents $142,000 for impairment charges related to equipment and $2,000 for employee termination costs related to the discontinuation of production of cut and sewn upholstery kits at our facility in Ouanaminthe, Haiti.
(5)
Restructuring expense for the three months ending October 30, 2022, represents $468,000 for employee termination benefits, $80,000 for a loss on disposal of equipment, $47,000 for lease termination costs, and $20,000 of other associated costs related to the exit of our cut and sew upholstery fabrics operation located in Shanghai, China.
(6)
Percent of sales column for income tax expense is calculated as a percent of loss before income taxes.
CULP, INC.
CONSOLIDATED STATEMENTS OF NET LOSS
FOR SIX MONTHS ENDED OCTOBER 29, 2023, AND OCTOBER 30, 2022
Unaudited
(Amounts in Thousands, Except for Per Share Data)
SIX MONTHS ENDED
Amount
Percent of Sales
(1)
(1)
October 29,
October 30,
% Over
October 29,
October 30,
2023
2022
(Under)
2023
2022
Net sales
$
115,387
$
120,985
(4.6
)%
100.0
%
100.0
%
Cost of sales (2)(3)
(100,352
)
(119,071
)
(15.7
)%
87.0
%
98.4
%
Gross profit
15,035
1,914
685.5
%
13.0
%
1.6
%
Selling, general and administrative expenses
(19,874
)
(17,968
)
10.6
%
17.2
%
14.9
%
Restructuring expense (4) (5)
(482
)
(615
)
(21.6
)%
0.4
%
0.5
%
Loss from operations
(5,321
)
(16,669
)
(68.1
)%
(4.6
)%
(13.8
)%
Interest income
627
96
553.1
%
0.5
%
0.1
%
Other income
145
747
(80.6
)%
(0.1
)%
(0.6
)%
Loss before income taxes
(4,549
)
(15,826
)
(71.3
)%
(3.9
)%
(13.1
)%
Income tax expense (6)
(1,217
)
(2,046
)
(40.5
)%
(26.8
)%
(12.9
)%
Net loss
$
(5,766
)
$
(17,872
)
(67.7
)%
(5.0
)%
(14.8
)%
Net loss per share - basic
$
(0.47
)
$
(1.46
)
(68.1
)%
Net loss per share - diluted
$
(0.47
)
$
(1.46
)
(68.1
)%
Average shares outstanding-basic
12,394
12,259
1.1
%
Average shares outstanding-diluted
12,394
12,259
1.1
%
Notes (1)
See page 13 for our Reconciliation of Selected Income Statement Information to Adjusted Results for the six months ending October 29, 2023, and October 30, 2022.
(2)
Cost of sales for the six months ending October 29, 2023, includes a net restructuring related charge totaling $101,000, which represents the markdown of inventory totaling $179,000 which occurred during the first quarter of fiscal 2024, partially offset by a gain on disposal of inventory totaling $78,000 which occurred during the second quarter of fiscal 2024, related to the discontinuation of production of cut and sewn upholstery kits at our facility in Ouanaminthe, Haiti.
(3)
Cost of sales for the six months ending October 30, 2022, includes a restructuring related charge totaling $98,000, which pertains to loss on disposal and markdowns of inventory related to the exit of our cut and sew upholstery fabrics operation located in Shanghai, China.
(4)
Restructuring expense for the six months ending October 29, 2023, represents $379,000 for impairment charges related to equipment and $103,000 for employee termination benefits related to the discontinuation of production of cut and sewn upholstery kits at our facility in Ouanaminthe, Haiti.
(5)
Restructuring expense for the six months ending October 30, 2022, represents $468,000 for employee termination benefits, $80,000 for a loss on disposal of equipment, $47,000 for lease termination costs, and $20,000 of other associated costs related to the exit of our cut and sew upholstery fabrics operation located in Shanghai, China.
(6)
Percent of sales column for income tax expense is calculated as a percent of loss before income taxes.
CONSOLIDATED BALANCE SHEETS
OCTOBER 29, 2023, OCTOBER 30, 2022, AND APRIL 30, 2023
Unaudited
(Amounts in Thousands)
Amounts
(Condensed)
(Condensed)
(Condensed)
October 29,
October 30,
Increase (Decrease)
* April 30,
2023
2022
Dollars
Percent
2023
Current assets
Cash and cash equivalents
$
15,214
19,137
(3,923
)
(20.5
)%
20,964
Short-term investments - Rabbi Trust
937
2,237
(1,300
)
(58.1
)%
1,404
Accounts receivable
23,036
22,443
593
2.6
%
24,778
Inventories
44,465
52,224
(7,759
)
(14.9
)%
45,080
Short-term note receivable
256
—
256
100.0
%
219
Current income taxes receivable
340
510
(170
)
(33.3
)%
—
Other current assets
4,346
3,462
884
25.5
%
3,071
Total current assets
88,594
100,013
(11,419
)
(11.4
)%
95,516
Property, plant & equipment, net
34,664
38,832
(4,168
)
(10.7
)%
36,111
Right of use assets
6,874
11,609
(4,735
)
(40.8
)%
8,191
Long-term investments - Rabbi Trust
6,995
7,526
(531
)
(7.1
)%
7,067
Intangible assets
2,064
2,440
(376
)
(15.4
)%
2,252
Long-term note receivable
1,596
—
1,596
100.0
%
1,726
Deferred income taxes
472
493
(21
)
(4.3
)%
480
Other assets
901
717
184
25.7
%
840
Total assets
$
142,160
161,630
(19,470
)
(12.0
)%
152,183
Current liabilities
Accounts payable - trade
27,903
24,298
3,605
14.8
%
29,442
Accounts payable - capital expenditures
298
200
98
49.0
%
56
Operating lease liability - current
2,540
2,655
(115
)
(4.3
)%
2,640
Deferred compensation
937
2,237
(1,300
)
(58.1
)%
1,404
Deferred revenue
853
1,527
(674
)
(44.1
)%
1,192
Accrued expenses
8,106
7,594
512
6.7
%
8,533
Accrued restructuring
—
33
(33
)
100.0
%
—
Income taxes payable - current
998
969
29
3.0
%
753
Total current liabilities
41,635
39,513
2,122
5.4
%
44,020
Operating lease liability - long-term
2,431
4,194
(1,763
)
(42.0
)%
3,612
Income taxes payable - long-term
2,055
2,629
(574
)
(21.8
)%
2,675
Deferred income taxes
5,663
5,700
(37
)
(0.6
)%
5,954
Deferred compensation
6,748
7,486
(738
)
(9.9
)%
6,842
Total liabilities
58,532
59,522
(990
)
(1.7
)%
63,103
Shareholders' equity
83,628
102,108
(18,480
)
(18.1
)%
89,080
Total liabilities and shareholders' equity
$
142,160
161,630
(19,470
)
(12.0
)%
152,183
Shares outstanding
12,470
12,294
176
1.4
%
12,327
* Derived from audited financial statements.
CULP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED OCTOBER 29, 2023, AND OCTOBER 30, 2022
Unaudited
(Amounts in Thousands)
SIX MONTHS ENDED
Amounts
October 29,
October 30,
2023
2022
Cash flows from operating activities:
Net loss
$
(5,766
)
$
(17,872
)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation
3,251
3,489
Non-cash inventory (credit) charge (1) (2)
(2,001
)
6,439
Amortization
193
214
Stock-based compensation
485
565
Deferred income taxes
(283
)
(269
)
Gain on sale of equipment
(278
)
(232
)
Non-cash restructuring expense
379
—
Foreign currency exchange gain
(697
)
(1,168
)
Changes in assets and liabilities:
Accounts receivable
1,644
(443
)
Inventories
2,304
7,192
Other current assets
(1,355
)
(728
)
Other assets
(123
)
58
Accounts payable
(495
)
6,027
Deferred revenue
(339
)
1,007
Accrued restructuring
—
33
Accrued expenses and deferred compensation
(762
)
1,254
Income taxes
(633
)
601
Net cash (used in) provided by operating activities
(4,476
)
6,167
Cash flows from investing activities:
Capital expenditures
(1,972
)
(1,051
)
Proceeds from the sale of equipment
309
465
Proceeds from note receivable
150
—
Proceeds from the sale of investments (rabbi trust)
986
46
Purchase of investments (rabbi trust)
(472
)
(505
)
Net cash used in investing activities
(999
)
(1,045
)
Cash flows from financing activities:
Common stock surrendered for withholding taxes payable
(146
)
(33
)
Payments of debt issuance costs
—
(206
)
Net cash used in financing activities
(146
)
(239
)
Effect of exchange rate changes on cash and cash equivalents
(129
)
(296
)
(Decrease) increase in cash and cash equivalents
(5,750
)
4,587
Cash and cash equivalents at beginning of year
20,964
14,550
Cash and cash equivalents at end of period
$
15,214
$
19,137
Free Cash Flow (3)
$
(5,604
)
$
4,826
(1)
The non-cash inventory credit of $2.0 million for the six months ending October 29, 2023, represents a $2.1 million credit related to adjustments made to our inventory markdown reserve estimated based on our policy for aged inventory for both our mattress and upholstery segments, partially offset by a net charge of $101,000 which represents the markdown of inventory totaling $179,000 which occurred during the first quarter of fiscal 2024, partially offset by a gain on disposal of inventory totaling $78,000 which occurred during the second quarter of fiscal 2024, related to the discontinuation of production of cut and sewn upholstery kits at our facility in Ouanaminthe, Haiti.
(2)
The non-cash inventory charge of $6.4 million for the six months ending October 30, 2022, represents a $2.9 million write down of inventory to its net realizable value associated with our mattress fabrics segment, $3.4 million related to markdowns of inventory estimated based on our policy for aged inventory for both our mattress and upholstery fabrics segments, and $98,000 for the loss on disposal and markdowns of inventory related to the exit of our cut and sew upholstery fabrics operation located in Shanghai, China.
(3)
See next page for Reconciliation of Free Cash Flow for the six-month periods ending October 29, 2023, and October 30, 2022, respectively.
CULP, INC.
RECONCILIATION OF FREE CASH FLOW
FOR THE SIX MONTHS ENDED OCTOBER 29, 2023, AND OCTOBER 30, 2022
Unaudited
(Amounts in Thousands)
SIX MONTHS ENDED
Amounts
October 29,
October 30,
2023
2022
A) Net cash (used in) provided by operating activities
$
(4,476
)
$
6,167
B) Minus: Capital expenditures
(1,972
)
(1,051
)
C) Plus: Proceeds from the sale of equipment
309
465
D) Plus: Proceeds from note receivable
150
—
E) Plus: Proceeds from the sale of investments (rabbi trust)
986
46
F) Minus: Purchase of investments (rabbi trust)
(472
)
(505
)
G) Effects of exchange rate changes on cash and cash equivalents
(129
)
(296
)
Free Cash Flow
$
(5,604
)
$
4,826
CULP, INC.
STATEMENTS OF OPERATIONS BY SEGMENT
FOR THE THREE MONTHS ENDED OCTOBER 29, 2023, AND OCTOBER 30, 2022
Unaudited
(Amounts in Thousands)
THREE MONTHS ENDED
Amounts
Percent of Total Sales
October 29,
October 30,
% Over
October 29,
October 30,
Net Sales by Segment
2023
2022
(Under)
2023
2022
Mattress Fabrics
$
31,377
$
26,230
19.6
%
53.4
%
44.9
%
Upholstery Fabrics
27,348
32,151
(14.9
)%
46.6
%
55.1
%
Net Sales
$
58,725
$
58,381
0.6
%
100.0
%
100.0
%
Gross Profit (Loss)
Gross Margin
Mattress Fabrics
$
2,483
$
(6,057
)
(141.0
)%
7.9
%
(23.1
)%
Upholstery Fabrics
5,389
3,942
36.7
%
19.7
%
12.3
%
Total Segment Gross Profit (Loss)
7,872
(2,115
)
(472.2
)%
13.4
%
(3.6
)%
Restructuring Related Credit (Charge) (1)
78
(98
)
(179.6
)%
0.1
%
(0.2
)%
Gross Profit (Loss)
$
7,950
$
(2,213
)
(459.2
)%
13.5
%
(3.8
)%
Selling, General and Administrative Expenses by Segment
Percent of Sales
Mattress Fabrics
$
3,419
$
2,945
16.1
%
10.9
%
11.2
%
Upholstery Fabrics
3,998
3,680
8.6
%
14.6
%
11.4
%
Unallocated Corporate Expenses
2,628
2,478
6.1
%
4.5
%
4.2
%
Selling, General and Administrative Expenses
$
10,045
$
9,103
10.3
%
17.1
%
15.6
%
(Loss) Income from Operations by Segment
Operating Margin
Mattress Fabrics
$
(936
)
$
(9,002
)
(89.6
)%
(3.0
)%
(34.3
)%
Upholstery Fabrics
1,391
262
430.9
%
5.1
%
0.8
%
Unallocated Corporate Expenses
(2,628
)
(2,478
)
6.1
%
(4.5
)%
(4.2
)%
Total Segment Loss from Operations
(2,173
)
(11,218
)
(80.6
)%
(3.7
)%
(19.2
)%
Restructuring Related Credit (Charge) (1)
78
(98
)
(179.6
)%
0.1
%
(0.2
)%
Restructuring Expense (1)
(144
)
(615
)
(76.6
)%
(0.2
)%
(1.1
)%
Loss from Operations
$
(2,239
)
$
(11,931
)
(81.2
)%
(3.8
)%
(20.4
)%
Depreciation Expense by Segment
Mattress Fabrics
$
1,468
$
1,519
(3.4
)%
Upholstery Fabrics
149
200
(25.5
)%
Depreciation Expense
$
1,617
$
1,719
(5.9
)%
Notes
(1)
See page 12 for our Reconciliation of Selected Income Statement Information to Adjusted Results for the three months ending October 29, 2023, and October 30, 2022.
CULP, INC.
STATEMENTS OF OPERATIONS BY SEGMENT
FOR THE SIX MONTHS ENDED OCTOBER 29, 2023, AND OCTOBER 30, 2022
Unaudited
(Amounts in Thousands)
SIX MONTHS ENDED
Amounts
Percent of Total Sales
October 29,
October 30,
% Over
October 29,
October 30,
Net Sales by Segment
2023
2022
(Under)
2023
2022
Mattress Fabrics
$
60,599
$
55,602
9.0
%
52.5
%
46.0
%
Upholstery Fabrics
54,788
65,383
(16.2
)%
47.5
%
54.0
%
Net Sales
$
115,387
$
120,985
(4.6
)%
100.0
%
100.0
%
Gross Profit (Loss)
Gross Margin
Mattress Fabrics
$
4,477
$
(6,093
)
(173.5
)%
7.4
%
(11.0
)%
Upholstery Fabrics
10,659
8,105
31.5
%
19.5
%
12.4
%
Total Segment Gross Profit
15,136
2,012
652.3
%
13.1
%
1.7
%
Restructuring Related Charge (1)
(101
)
(98
)
3.1
%
(0.1
)%
(0.1
)%
Gross Profit
$
15,035
$
1,914
685.5
%
13.0
%
1.6
%
Selling, General and Administrative Expenses by Segment
Percent of Sales
Mattress Fabrics
$
6,811
$
5,829
16.8
%
11.2
%
10.5
%
Upholstery Fabrics
7,939
7,302
8.7
%
14.5
%
11.2
%
Unallocated Corporate Expenses
5,124
4,837
5.9
%
4.4
%
4.0
%
Selling, General and Administrative Expenses
$
19,874
$
17,968
10.6
%
17.2
%
14.9
%
(Loss) Income from Operations by Segment
Operating Margin
Mattress Fabrics
$
(2,334
)
$
(11,922
)
(80.4
)%
(3.9
)%
(21.4
)%
Upholstery Fabrics
2,720
803
238.7
%
5.0
%
1.2
%
Unallocated Corporate Expenses
(5,124
)
(4,837
)
5.9
%
(4.4
)%
(4.0
)%
Total Segment Loss from Operations
(4,738
)
(15,956
)
(70.3
)%
(4.1
)%
(13.2
)%
Restructuring Related Charge (1)
(101
)
(98
)
3.1
%
(0.1
)%
(0.1
)%
Restructuring Expense (1)
(482
)
(615
)
(21.6
)%
(0.4
)%
(0.5
)%
Loss from Operations
$
(5,321
)
$
(16,669
)
(68.1
)%
(4.6
)%
(13.8
)%
Return on Capital (2)
Mattress Fabrics
(14.2
)%
(18.2
)%
(22.0
)%
Upholstery Fabrics
29.0
%
15.2
%
90.8
%
Unallocated Corporate
N.M.
N.M.
N.M.
Consolidated
(19.4
)%
(19.5
)%
(0.5
)%
Capital Employed (2) (3)
Mattress Fabrics
$
61,185
$
68,471
(10.6
)%
Upholstery Fabrics
11,324
18,826
(39.8
)%
Unallocated Corporate
3,562
3,962
(10.1
)%
Consolidated
$
76,071
$
91,259
(16.6
)%
Depreciation Expense by Segment
Mattress Fabrics
$
2,922
$
3,088
(5.4
)%
Upholstery Fabrics
329
401
(18.0
)%
Depreciation Expense
$
3,251
$
3,489
(6.8
)%
Notes
(1)
See page 13 for our Reconciliation of Selected Income Statement Information to Adjusted Results for the six months ending October 29, 2023, and October 30, 2022.
(2)
See pages 15 through 18 for our Return on Capital Employed by Segment for the six months ending October 29, 2023 and October 30, 2022.
(3)
The capital employed balances are as of October 29, 2023, and October 30, 2022.
CULP, INC.
RECONCILIATION OF SELECTED INCOME STATEMENT INFORMATION TO ADJUSTED RESULTS
FOR THREE MONTHS ENDED OCTOBER 29, 2023, AND OCTOBER 30, 2022
Unaudited
(Amounts in Thousands)
October 29,
As Reported
2023
October 29,
Adjusted
2023
Adjustments
Results
Net sales
$
58,725
—
$
58,725
Cost of sales (1)
(50,775
)
(78
)
(50,853
)
Gross profit
7,950
(78
)
7,872
Selling, general and administrative expenses
(10,045
)
—
(10,045
)
Restructuring expense (2)
(144
)
144
—
Loss from operations
$
(2,239
)
66
$
(2,173
)
Notes
(1)Cost of sales for the three months ending October 29, 2023, includes a restructuring related credit totaling $78,000 for adjustments made to our inventory markdown reserves related to the discontinuation of production of cut and sewn upholstery kits at our facility in Ouanaminthe, Haiti.
(2)
Restructuring expense for the three months ending October 29, 2023, represents $142,000 for impairment charges related to equipment and $2,000 for employee termination costs related to the discontinuation of production of cut and sewn upholstery kits at our facility in Ouanaminthe, Haiti.
October 30,
As Reported
2022
October 30,
Adjusted
2022
Adjustments
Results
Net sales
$
58,381
—
$
58,381
Cost of sales (1)
(60,594
)
98
(60,496
)
Gross loss
(2,213
)
98
(2,115
)
Selling, general and administrative expenses
(9,103
)
—
(9,103
)
Restructuring expense (2)
(615
)
615
—
Loss from operations
$
(11,931
)
713
$
(11,218
)
Notes
(1)Cost of sales for the three months ending October 30, 2022, includes restructuring related charges totaling $98,000, which pertains to loss on disposal and markdowns of inventory related to the exit of our cut and sew upholstery fabrics operation located in Shanghai, China.
(2)
Restructuring expense for the three months ending October 30, 2022, represents $468,000 for employee termination benefits, $80,000 for a loss on disposal of equipment, $47,000 for lease termination costs, and $20,000 of other associated costs related to the exit of our cut and sew upholstery fabrics operation located in Shanghai, China.
CULP, INC.
RECONCILIATION OF SELECTED INCOME STATEMENT INFORMATION TO ADJUSTED RESULTS
FOR SIX MONTHS ENDED OCTOBER 29, 2023, AND OCTOBER 30, 2022
Unaudited
(Amounts in Thousands)
October 29,
As Reported
2023
October 29,
Adjusted
2023
Adjustments
Results
Net sales
$
115,387
—
$
115,387
Cost of sales (1)
(100,352
)
101
(100,251
)
Gross profit
15,035
101
15,136
Selling, general and administrative expenses
(19,874
)
—
(19,874
)
Restructuring expense (2)
(482
)
482
—
Loss from operations
$
(5,321
)
583
$
(4,738
)
Notes
(1)Cost of sales for the six months ending October 29, 2023, includes a net restructuring related charge totaling $101,000, which represents the markdown of inventory totaling $179,000 which occurred during the first quarter of fiscal 2024, partially offset by a gain on disposal of inventory totaling $78,000 which occurred during the second quarter of fiscal 2024, related to the discontinuation of production of cut and sewn upholstery kits at our facility in Ouanaminthe, Haiti.
(2)
Restructuring expense for the six months ending October 29, 2023, represents $379,000 for impairment charges related to equipment and $103,000 for employee termination benefits related to the discontinuation of production of cut and sewn upholstery kits at our facility in Ouanaminthe, Haiti.
October 30,
As Reported
2022
October 30,
Adjusted
2022
Adjustments
Results
Net sales
$
120,985
—
$
120,985
Cost of sales (1)
(119,071
)
98
(118,973
)
Gross profit
1,914
98
2,012
Selling, general and administrative expenses
(17,968
)
—
(17,968
)
Restructuring expense (2)
(615
)
615
—
Loss from operations
$
(16,669
)
713
$
(15,956
)
Notes
(1)Cost of sales for the six months ending October 30, 2022, includes restructuring related charges totaling $98,000, which pertains to loss on disposal and markdowns of inventory related to the exit of our cut and sew upholstery fabrics operation located in Shanghai, China.
(2)
Restructuring expense for the six months ending October 30, 2022, represents $468,000 for employee termination benefits, $80,000 that relates to a loss on disposal of equipment, $47,000 for lease termination costs, and $20,000 of other associated costs related to the exit of our cut and sew upholstery fabrics operation located in Shanghai, China.
CULP, INC.
CONSOLIDATED STATEMENTS OF ADJUSTED EBITDA
FOR THE TWELVE MONTHS ENDED OCTOBER 29, 2023, AND OCTOBER 30, 2022
Unaudited
(Amounts in Thousands)
Quarter Ended
Quarter Ended
Quarter Ended
Quarter Ended
Trailing 12 Months
January 29,
April 30,
July 30,
October 29,
October 29,
2023
2023
2023
2023
2023
Net loss
$
(8,968
)
$
(4,681
)
$
(3,342
)
$
(2,424
)
$
(19,415
)
Income tax expense
286
798
701
516
2,301
Interest income, net
(196
)
(239
)
(345
)
(282
)
(1,062
)
Depreciation expense
1,739
1,619
1,634
1,617
6,609
Restructuring expense
711
70
338
144
1,263
Restructuring related charge (credit)
—
—
179
(78
)
101
Amortization expense
109
115
96
97
417
Stock based compensation
322
258
322
163
1,065
Adjusted EBITDA
$
(5,997
)
$
(2,060
)
$
(417
)
$
(247
)
$
(8,721
)
% Net Sales
(11.4
)%
(3.4
)%
(0.7
)%
(0.4
)%
(3.8
)%
Quarter Ended
Quarter Ended
Quarter Ended
Quarter Ended
Trailing 12 Months
January 30,
May 1,
July 31,
October 30,
October 30,
2022
2022
2022
2022
2022
Net income (loss) (1)
$
(289
)
$
(6,023
)
$
(5,699
)
$
(12,173
)
$
(24,184
)
Income tax expense
1,284
253
896
1,150
3,583
Interest income, net
(214
)
(26
)
(17
)
(79
)
(336
)
Depreciation expense
1,732
1,791
1,770
1,719
7,012
Restructuring expense
—
—
—
615
615
Restructuring related charge
—
—
—
98
98
Amortization expense
150
142
105
109
506
Stock based compensation
171
253
252
313
989
Adjusted EBITDA (1)
$
2,834
$
(3,610
)
$
(2,693
)
$
(8,248
)
$
(11,717
)
% Net Sales
3.5
%
(6.3
)%
(4.3
)%
(14.1
)%
(4.5
)%
% Over (Under)
(311.6
)%
(42.9
)%
(84.5
)%
(97.0
)%
(25.6
)%
(1)Net loss and adjusted EBITDA for the three-month and the twelve-month periods ended October 30, 2022, include a non-cash charge totaling $5.2 million, which represents a $2.9 million write down of inventory to its net realizable value associated with our mattress fabrics segment and $2.3 million related to markdowns of inventory estimated based on our policy for aged inventory for both our mattress and upholstery fabrics segments.
CULP, INC.
RETURN ON CAPITAL EMPLOYED BY SEGMENT
FOR THE TWELVE MONTHS ENDED OCTOBER 29, 2023
Unaudited
(Amounts in Thousands)
Adjusted Operating (Loss) Income
Twelve Months Ended
Average Capital
Return on Avg. Capital
October 29, 2023 (1)
Employed (3)
Employed (2)
Mattress Fabrics
$
(9,093
)
$
64,140
(14.2
)%
Upholstery Fabrics
3,910
13,489
29.0
%
Unallocated Corporate
(10,584
)
3,724
N.M.
Total
$
(15,767
)
$
81,354
(19.4
)%
Average Capital Employed
As of the three Months October 29, 2023
As of the three Months Ended July 30, 2023
As of the three Months Ended April 30, 2023
Mattress
Upholstery
Unallocated
Mattress
Upholstery
Unallocated
Mattress
Upholstery
Unallocated
Fabrics
Fabrics
Corporate
Total
Fabrics
Fabrics
Corporate
Total
Fabrics
Fabrics
Corporate
Total
Total assets (4)
$
75,924
35,082
31,154
142,160
$
72,286
37,592
33,024
142,902
$
75,494
39,127
37,562
152,183
Total liabilities
(14,739
)
(23,758
)
(20,035
)
(58,532
)
(11,230
)
(25,235
)
(20,320
)
(56,785
)
(11,387
)
(29,638
)
(22,078
)
(63,103
)
Subtotal
$
61,185
$
11,324
$
11,119
$
83,628
$
61,056
$
12,357
$
12,704
$
86,117
$
64,107
$
9,489
$
15,484
$
89,080
Cash and cash equivalents
—
—
(15,214
)
(15,214
)
—
—
(16,812
)
(16,812
)
—
—
(20,964
)
(20,964
)
Short-term investments - Rabbi Trust
—
—
(937
)
(937
)
—
—
(791
)
(791
)
—
—
(1,404
)
(1,404
)
Current income taxes receivable
—
—
(340
)
(340
)
—
—
(202
)
(202
)
—
—
—
—
Long-term investments - Rabbi Trust
—
—
(6,995
)
(6,995
)
—
—
(7,204
)
(7,204
)
—
—
(7,067
)
(7,067
)
Deferred income taxes - non-current
—
—
(472
)
(472
)
—
—
(476
)
(476
)
—
—
(480
)
(480
)
Deferred compensation - current
—
—
937
937
—
—
791
791
—
—
1,404
1,404
Accrued restructuring
—
—
—
—
—
—
10
10
—
—
—
—
Income taxes payable - current
—
—
998
998
—
—
526
526
—
—
753
753
Income taxes payable - long-term
—
—
2,055
2,055
—
—
2,710
2,710
—
—
2,675
2,675
Deferred income taxes - non-current
—
—
5,663
5,663
—
—
5,864
5,864
—
—
5,954
5,954
Deferred compensation non-current
—
—
6,748
6,748
—
—
6,966
6,966
—
—
6,842
6,842
Total Capital Employed
$
61,185
$
11,324
$
3,562
$
76,071
$
61,056
$
12,357
$
4,086
$
77,499
$
64,107
$
9,489
$
3,197
$
76,793
CULP, INC.
RETURN ON CAPITAL EMPLOYED BY SEGMENT - CONTINUED
FOR THE TWELVE MONTHS ENDED OCTOBER 29, 2023
Unaudited
(Amounts in Thousands)
As of the three Months Ended January 29, 2023
As of the three Months Ended October 30, 2022
Mattress
Upholstery
Unallocated
Mattress
Upholstery
Unallocated
Fabrics
Fabrics
Corporate
Total
Fabrics
Fabrics
Corporate
Total
Total assets (4)
$
75,393
39,817
35,388
150,598
$
78,366
44,934
38,330
161,630
Total liabilities
(9,511
)
(24,367
)
(23,216
)
(57,094
)
(9,895
)
(26,108
)
(23,519
)
(59,522
)
Subtotal
$
65,882
$
15,450
$
12,172
$
93,504
$
68,471
$
18,826
$
14,811
$
102,108
Cash and cash equivalents
—
—
(16,725
)
(16,725
)
—
—
(19,137
)
(19,137
)
Short-term investments - Rabbi Trust
—
—
(2,420
)
(2,420
)
—
—
(2,237
)
(2,237
)
Current income taxes receivable
—
—
(238
)
(238
)
—
—
(510
)
(510
)
Long-term investments - Rabbi Trust
—
—
(7,725
)
(7,725
)
—
—
(7,526
)
(7,526
)
Deferred income taxes - non-current
—
—
(463
)
(463
)
—
—
(493
)
(493
)
Deferred compensation - current
—
—
2,420
2,420
—
—
2,237
2,237
Accrued restructuring
—
—
—
—
—
—
33
33
Income taxes payable - current
—
—
467
467
—
—
969
969
Income taxes payable - long-term
—
—
2,648
2,648
—
—
2,629
2,629
Deferred income taxes - non-current
—
—
6,089
6,089
—
—
5,700
5,700
Deferred compensation non-current
—
—
7,590
7,590
—
—
7,486
7,486
Total Capital Employed
$
65,882
$
15,450
$
3,815
$
85,147
$
68,471
$
18,826
$
3,962
$
91,259
Mattress
Upholstery
Unallocated
Fabrics
Fabrics
Corporate
Total
Average Capital Employed (3)
$
64,140
$
13,489
$
3,724
$
81,354
Notes
(1)
See last page of this presentation for calculation.
(2)
Return on average capital employed represents the twelve months operating (loss) income as of October 29, 2023, divided by average capital employed. Average capital employed does not include cash and cash equivalents, short-term and long-term investments – Rabbi Trust, income taxes receivable and payable, accrued restructuring, noncurrent deferred income tax assets and liabilities, and current and non-current deferred compensation.
(3)
Average capital employed was computed using the five quarterly periods ending October 29, 2023, July 30, 2023, April 30, 2023, January 29, 2023, and October 30, 2022.
(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 OCTOBER 30, 2022
Unaudited
(Amounts in Thousands)
Adjusted Operating (Loss) Income
Twelve Months Ended
Average Capital
Return on Avg. Capital
October 30, 2022 (1)
Employed (3)
Employed (2)
Mattress Fabrics
$
(14,460
)
$
79,364
(18.2
)%
Upholstery Fabrics
3,134
20,661
15.2
%
Unallocated Corporate
(8,910
)
3,908
N.M.
Total
$
(20,236
)
$
103,933
(19.5
)%
Average Capital Employed
As of the three Months Ended October 30, 2022
As of the three Months Ended July 31, 2022
As of the three Months Ended May 1, 2022
Mattress
Upholstery
Unallocated
Mattress
Upholstery
Unallocated
Mattress
Upholstery
Unallocated
Fabrics
Fabrics
Corporate
Total
Fabrics
Fabrics
Corporate
Total
Fabrics
Fabrics
Corporate
Total
Total assets (4)
$
78,366
44,934
38,330
161,630
$
90,842
51,053
38,595
180,490
$
92,609
51,124
33,830
177,563
Total liabilities
(9,895
)
(26,108
)
(23,519
)
(59,522
)
(11,934
)
(30,762
)
(23,799
)
(66,495
)
(8,569
)
(25,915
)
(23,578
)
(58,062
)
Subtotal
$
68,471
$
18,826
$
14,811
$
102,108
$
78,908
$
20,291
$
14,796
$
113,995
$
84,040
$
25,209
$
10,252
$
119,501
Cash and cash equivalents
—
—
(19,137
)
(19,137
)
—
—
(18,874
)
(18,874
)
—
—
(14,550
)
(14,550
)
Short-term investments - Rabbi Trust
—
—
(2,237
)
(2,237
)
—
—
—
—
—
—
—
—
Current income taxes receivable
—
—
(510
)
(510
)
—
—
(798
)
(798
)
—
—
(857
)
(857
)
Long-term investments - Rabbi Trust
—
—
(7,526
)
(7,526
)
—
—
(9,567
)
(9,567
)
—
—
(9,357
)
(9,357
)
Deferred income taxes - non-current
—
—
(493
)
(493
)
—
—
(546
)
(546
)
—
—
(528
)
(528
)
Deferred compensation - current
—
—
2,237
2,237
—
—
—
—
Accrued restructuring
—
—
33
33
—
—
—
—
—
—
—
—
Income taxes payable - current
—
—
969
969
—
—
587
587
—
—
413
413
Income taxes payable - long-term
—
—
2,629
2,629
—
—
3,118
3,118
—
—
3,097
3,097
Deferred income taxes - non-current
—
—
5,700
5,700
—
—
6,007
6,007
—
—
6,004
6,004
Deferred compensation
—
—
7,486
7,486
—
—
9,528
9,528
—
—
9,343
9,343
Total Capital Employed
$
68,471
$
18,826
$
3,962
$
91,259
$
78,908
$
20,291
$
4,251
$
103,450
$
84,040
$
25,209
$
3,817
$
113,066
CULP INC.
RETURN ON CAPITAL EMPLOYED BY SEGMENT - CONTINUED
FOR THE TWELVE MONTHS ENDED OCTOBER 30, 2022
Unaudited
(Amounts in Thousands)
As of the three Months Ended January 30, 2022
As of the three Months Ended October 31, 2021
Mattress
Upholstery
Unallocated
Mattress
Upholstery
Unallocated
Fabrics
Fabrics
Corporate
Total
Fabrics
Fabrics
Corporate
Total
Total assets (4)
$
103,370
67,272
40,925
211,567
$
97,390
55,862
56,073
209,325
Total liabilities
(16,540
)
(45,596
)
(22,697
)
(84,833
)
(18,818
)
(38,560
)
(23,493
)
(80,871
)
Subtotal
$
86,830
$
21,676
$
18,228
$
126,734
$
78,572
$
17,302
$
32,580
$
128,454
Cash and cash equivalents
—
—
(11,780
)
(11,780
)
—
—
(16,956
)
(16,956
)
Short-term investments - Available-For-Sale
—
—
(438
)
(438
)
—
—
(9,709
)
(9,709
)
Short-term investments - Held-To-Maturity
—
—
(1,315
)
(1,315
)
—
—
(1,564
)
(1,564
)
Current income taxes receivable
—
—
(367
)
(367
)
—
—
(613
)
(613
)
Long-term investments - Held-To-Maturity
—
—
(8,677
)
(8,677
)
—
—
(8,353
)
(8,353
)
Long-term investments - Rabbi Trust
—
—
(9,223
)
(9,223
)
—
—
(9,036
)
(9,036
)
Deferred income taxes - non-current
—
—
(500
)
(500
)
—
—
(452
)
(452
)
Income taxes payable - current
—
—
240
240
—
—
646
646
Income taxes payable - long-term
—
—
3,099
3,099
—
—
3,099
3,099
Deferred income taxes - non-current
—
—
5,484
5,484
—
—
4,918
4,918
Deferred compensation
—
—
9,180
9,180
—
—
9,017
9,017
Total Capital Employed
$
86,830
$
21,676
$
3,931
$
112,437
$
78,572
$
17,302
$
3,577
$
99,451
Mattress
Upholstery
Unallocated
Fabrics
Fabrics
Corporate
Total
Average Capital Employed (3)
$
79,364
$
20,661
$
3,908
$
103,933
Notes
(1)
See last page of this presentation for calculation.
(2)
Return on average capital employed represents the last twelve months operating (loss) income as of October 30, 2022, divided by average capital employed. Average capital employed does not include cash and cash equivalents, short-term investments Available-For-Sale, short-term and long-term investments Held-To-Maturity, long-term investments – Rabbi Trust, accrued restructuring, 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 October 30, 2022, July 31, 2022, May 1, 2022, January 30, 2022, October 31, 2021.
(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.
CONSOLIDATED STATEMENTS OF ADJUSTED OPERATING (LOSS) INCOME
FOR THE TWELVE MONTHS ENDED OCTOBER 29, 2023, AND OCTOBER 30, 2022
Quarter Ended
Trailing 12
Months
01/29/2023
4/30/2023
07/30/2023
10/29/2023
10/29/2023
Mattress Fabrics
$
(4,229
)
$
(2,530
)
$
(1,398
)
$
(936
)
$
(9,093
)
Upholstery Fabrics
(420
)
1,611
1,328
1,391
3,910
Unallocated Corporate
(2,423
)
(3,038
)
(2,495
)
(2,628
)
(10,584
)
Operating loss
$
(7,072
)
$
(3,957
)
$
(2,565
)
$
(2,173
)
$
(15,767
)
Quarter Ended
Trailing 12
Months
01/30/2022
5/1/2022
7/31/2022
10/30/2022
10/30/2022
Mattress Fabrics
$
364
$
(2,901
)
$
(2,921
)
$
(9,002
)
$
(14,460
)
Upholstery Fabrics
2,446
(116
)
542
262
3,134
Unallocated Corporate
(1,707
)
(2,366
)
(2,359
)
(2,478
)
(8,910
)
Operating income (loss)
$
1,103
$
(5,383
)
$
(4,738
)
$
(11,218
)
$
(20,236
)
% Over (Under)
(741.2
)%
(26.5
)%
(45.9
)%
(80.6
)%
(22.1
)%
View source version on businesswire.com: https://www.businesswire.com/news/home/20231204438447/en/
Investor Relations Contact Ken Bowling, Executive Vice President, Chief Financial Officer, and Treasurer: (336) 881-5630 krbowling@culp.com
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