Culp Final Quarter Hampered by COVID-19

In its fourth fiscal quarter of 2020, which ended May 3 and was affected severely by the novel coronavirus pandemic, Culp Inc. reported a net loss of $27.8 million. The loss includes $13.7 million in noncash asset impairment charges related to the pandemic, and a net loss of $8.7 million from discontinued operation of eLuxury LLC.

On March 31, the High Point, North Carolina-based textile maker sold its majority interest in eLuxury, eliminating its home accessories segment. The reported financial performance for the segment was excluded from its continuing operations results. 

 Pretax loss from continuing operations using generally accepted accounting principles was $18.4 million, compared with continuing operations income in the prior-year period of $2 million. 

RESULTS

Culp’s 4th quarter

Net loss

-$27.8 million

Pretax loss from continuing operations

-$18.4 million

Net sales

$47.4 million

Ticking sales

-38.5%

Upholstery sales

-17.3%

Culp’s full year

Net loss

-$28.7 million

Pretax loss from continuing operations

-$7.7 million

Net sales

$256.2 million

Ticking sales

-9.8%

Upholstery sales

-8%

Net sales in the fourth fiscal quarter totaled $47.4 million, a 29.3% decline compared with the prior-year period. Mattress fabric sales were down 38.5% and upholstery fabric sales were down 17.3%.

The company’s financial position at the end of fiscal 2020 reflected total cash and investments of $77.1 million and outstanding borrowings totaling $38.4 million, for a net cash position of $38.7 million.

Net loss for the year was $28.7 million, compared with net income of $5.5 million in fiscal 2019. Pretax loss from continuing operations (GAAP) for fiscal 2020 was $7.7 million, compared with pretax income from continuing operations in 2019 of $12.7 million. 

Net sales in fiscal 2020 were $256.2 million, an 8.9% decline compared with the prior year. Mattress fabric sales were down 9.8% and upholstery sales were down 8%.

Chief Executive Officer Iv Culp said: “The broad economic disruption caused by the COVID-19 pandemic significantly affected our performance for the fourth quarter and fiscal 2020. … Although the impact and duration of this economic and health crisis remain unknown, our business has improved materially since the end of fiscal 2020, and we are encouraged by positive sales trends and reports of consumer spending in the home furnishings sector. Our mattress fabrics segment and our upholstery fabrics segment have both seen better-than-expected increases in orders, shipments, and output for the first eight weeks of fiscal 2021. … “It is likely that the COVID-19 pandemic will continue to have an impact on our business through at least the first half of fiscal 2021. Barring additional shutdowns as a result of the virus, we believe business will continue its solid return through the first and second quarters of fiscal 2021, and we will benefit from pent-up demand and increased consumer attention to the home environment and overall comfort.”

Sandy Brown, president of the mattress fabrics division, said: “We experienced a rapid drop in demand beginning in mid-March, as customers and retail stores began closing. … Due to government-mandated closure requirements … we shut down our facilities in Canada and Haiti for several weeks. We also reduced our production schedules and furloughed workers at our U.S. facilities to align with the severely reduced demand, while aggressively cutting costs, delaying nonessential capital expenditures and reducing inventory.

“Despite these challenges, we quickly pivoted to repurpose our available operations to produce face masks, bedding covers and fabrics for health care operations and consumer health.”

In limited financial guidance for 2021, Culp expects sales and operating performance for the first quarter of fiscal 2021 to be significantly improved, compared with the fourth quarter of fiscal 2020, with operating income expected to be near break‑even and the company’s net cash position expected to be comparable to its net cash position at the end of the fiscal 2020 year.

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