Culp, Inc. (NYSE:CULP) Q1 2022 Earnings Conference Call September 2, 2021 11:00 AM ET Company Participants Dru Anderson - Investor Relations Iv Culp - President and CEO Ken Bowling - Chief Financial Officer Boyd Chumbley - President, Upholstery Fabrics business Conference Call Participants Anthony Lebiedzinski - Sidoti & Company Budd Bugatch - Water Tower Research Marco Rodriguez - Stonegate Capital Markets Operator Good morning. And welcome to the Culp, Inc. First Quarter 2022 Earnings Conference Call. All ...

[PART I](index=2&type=section&id=PART%20I) [Item 1. Business](index=6&type=section&id=Item%201.%20Business) Culp, Inc, a leading manufacturer of mattress and upholstery fabrics, operates globally and achieved significant sales growth in fiscal 2021 driven by heightened consumer focus on home furnishings Fiscal 2021 Net Sales Breakdown | Segment | Net Sales (Millions) | Percentage of Total | | :--- | :--- | :--- | | Mattress Fabrics | $157.7 | 53% | | Upholstery Fabrics | $142.0 | 47% | | **Total** | **$299.7** | **100%** | - Culp is the **largest producer of mattress fabrics** in North America and one of the largest marketers of upholstery fabrics for furniture in North America, based on total sales[14](index=14&type=chunk) - The company's sales **increased significantly in fiscal 2021** due to increased consumer focus on the at-home experience during the COVID-19 pandemic, coupled with the company's ability to meet the surge in demand through its global platform[18](index=18&type=chunk) [COVID-19 Impact and Business Response](index=7&type=section&id=COVID-19%20Impact%20and%20Business%20Response) The company implemented liquidity preservation measures during the pandemic and subsequently invested in capacity to meet recovering demand - In response to the pandemic, Culp implemented measures to preserve liquidity and reduce costs, including **selling its majority interest in eLuxury**, repurposing operations for healthcare products, amending its credit facility, reducing operating costs, and temporarily suspending its share repurchase program[25](index=25&type=chunk) - As demand recovered in fiscal 2021, the company **repaid all outstanding borrowings**, reinstated full salaries and board compensation, and invested **$4 million in additional knit machines** to increase capacity for the mattress fabrics segment[26](index=26&type=chunk) - During the fourth quarter of fiscal 2021, the company **acquired the remaining 50% ownership** of its Haiti sewn mattress cover operation, gaining full control to enhance flexibility and capacity[28](index=28&type=chunk) [Segments](index=8&type=section&id=Segments) Both the Mattress Fabrics and Upholstery Fabrics segments experienced significant sales growth in fiscal 2021, driven by strong consumer demand Net Sales by Segment (in Millions) | Segment | Fiscal 2021 | Fiscal 2020 | Fiscal 2019 | | :--- | :--- | :--- | :--- | | Mattress Fabrics | $157.7 | $131.4 | $145.7 | | Upholstery Fabrics | $142.0 | $124.8 | $135.6 | | **Total Company** | **$299.7** | **$256.2** | **$281.3** | - **Mattress Fabrics (Culp Home Fashions):** Sales increased significantly in fiscal 2021, driven by consumer focus on home comfort and market share gains[44](index=44&type=chunk)[45](index=45&type=chunk) - **Upholstery Fabrics:** Sales recovered in fiscal 2021 with **strong growth in the residential business**, driven by demand for performance fabrics like LiveSmart®, which was partially offset by lower sales in the pandemic-impacted hospitality business[51](index=51&type=chunk)[52](index=52&type=chunk) [Overview of Industry and Markets](index=10&type=section&id=Overview%20of%20Industry%20and%20Markets) The bedding and furniture industries are influenced by trade policies, consumer trends like boxed mattresses, and macroeconomic factors affecting discretionary spending - The bedding industry has been disrupted by an increase in low-priced mattress imports, leading to **anti-dumping duties** imposed by the U.S. on imports from China and seven other countries[57](index=57&type=chunk)[58](index=58&type=chunk) - Key trends in the bedding industry include the rising demand for **roll-packed/boxed mattresses**, increased consumer awareness of sleep health, and a growing emphasis on fabric design and performance features[59](index=59&type=chunk) - The residential furniture industry is influenced by the housing market and economic trends; in fiscal 2021, demand was boosted by a **consumer shift in discretionary spending** from travel towards home furnishings due to the pandemic[61](index=61&type=chunk) [Human Capital](index=17&type=section&id=Human%20Capital) The company employed 1,430 people globally at the end of fiscal 2021, with a small portion of its Canadian workforce unionized - As of the end of fiscal 2021, Culp employed **1,430 people**, with 573 in the United States and 857 in international locations[112](index=112&type=chunk) - Approximately **12% of the company's workforce**, located at the manufacturing facility in Canada, is represented by a local union, with a collective bargaining agreement that expires on February 1, 2023[113](index=113&type=chunk) [Customers and Sales](index=18&type=section&id=Customers%20and%20Sales) The company has a concentrated customer base, with its two largest customers accounting for a significant portion of consolidated sales - The company's largest customer in the upholstery fabrics segment is **La-Z-Boy Incorporated**, accounting for approximately **13% of consolidated sales** in fiscal 2021[122](index=122&type=chunk) - The largest customer in the mattress fabrics segment is **Serta Simmons Holdings, LLC**, which accounted for approximately **10% of the company's overall sales** in fiscal 2021[121](index=121&type=chunk) Net Sales by Geographic Area (Fiscal 2021) | Geographic Area | Net Sales (Thousands) | Percentage of Total | | :--- | :--- | :--- | | United States | $217,473 | 72.6% | | North America (Excl. USA) | $32,925 | 11.0% | | Far East and Asia | $43,764 | 14.6% | | All other areas | $5,558 | 1.9% | | **Total** | **$299,720** | **100.0%** | [Item 1A. Risk Factors](index=20&type=section&id=Item%201A.%20Risk%20Factors) The company faces risks from macroeconomic conditions, operational dependencies on international trade, and market pressures including competition and customer concentration - **Macroeconomic Risks:** The **COVID-19 pandemic** continues to pose a significant risk, potentially affecting operations, supply chains, and consumer demand, while general economic uncertainty can negatively impact sales[134](index=134&type=chunk)[141](index=141&type=chunk) - **Operational Risks:** The company's business may be adversely affected by **increased tariffs or changes in U.S. trade policy**, as many products are manufactured or sourced from outside the U.S., particularly China[146](index=146&type=chunk)[151](index=151&type=chunk) - **Market and Financial Risks:** The business is highly competitive, creating deflationary price pressures, and is exposed to fluctuations in raw material prices and the potential **loss of a major customer**, with two customers accounting for 23% of consolidated sales[143](index=143&type=chunk)[161](index=161&type=chunk)[163](index=163&type=chunk) - **Cybersecurity and Technology Risks:** The company's increasing dependence on information technology systems exposes it to risks of system failures, **cybersecurity breaches**, and data leaks, which could damage the business[167](index=167&type=chunk)[168](index=168&type=chunk) [Item 2. Properties](index=27&type=section&id=Item%202.%20Properties) Culp operates seventeen owned and leased facilities globally, which are considered adequate for current operations, with the mattress segment running near capacity Key Operational Facilities | Segment | Location | Principal Use | Ownership | | :--- | :--- | :--- | :--- | | Administrative | High Point, NC | Corporate Headquarters | Leased | | Mattress Fabrics | Stokesdale, NC | Manufacturing & Distribution | Owned | | Mattress Fabrics | St. Jerome, Quebec, Canada | Manufacturing | Owned | | Mattress Fabrics | Ouanaminthe, Haiti | Manufacturing | Leased | | Upholstery Fabrics | Shanghai, China | Manufacturing & Warehouse | Leased | | Upholstery Fabrics | Burlington, NC | Distribution & Design | Leased | - The company notes that its mattress fabrics segment is currently performing at **near capacity**, while the upholstery fabrics segment has the flexibility to source products from outside suppliers to meet demand[193](index=193&type=chunk) [Item 3. Legal Proceedings](index=28&type=section&id=Item%203.%20Legal%20Proceedings) The company reports no material legal proceedings requiring disclosure - There are **no material legal proceedings** to be disclosed[196](index=196&type=chunk) [PART II](index=29&type=section&id=PART%20II) [Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities](index=29&type=section&id=Item%205.%20Market%20for%20the%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Culp's common stock trades on the NYSE under the symbol 'CULP', and the company paid dividends in fiscal 2021 while reinstating its share repurchase program - The company's common stock is listed on the NYSE under the ticker symbol **CULP**[200](index=200&type=chunk) - In fiscal 2021, dividend payments totaled **$5.3 million**, with quarterly dividends ranging from $0.105 to $0.11 per share[204](index=204&type=chunk) - A **$5.0 million share repurchase authorization** was reinstated on March 2, 2021, after being temporarily suspended due to the pandemic; no shares were repurchased in fiscal 2021[203](index=203&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=32&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Fiscal 2021 saw a 17% increase in net sales and a significant turnaround in profitability, though cash decreased due to the repayment of precautionary borrowings Fiscal 2021 vs. 2020 Results of Continuing Operations (in thousands) | Metric | Fiscal 2021 | Fiscal 2020 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $299,720 | $256,166 | 17.0% | | Gross Profit | $49,832 | $40,498 | 23.0% | | Gross Profit Margin | 16.6% | 15.8% | +80bp | | Income (Loss) from Operations | $12,076 | $(7,568) | N.M. | | Operating Margin | 4.0% | (3.0)% | +700bp | | Net Income (Loss) | $3,218 | $(11,158) | N.M. | - The increase in net sales for both segments reflects **heightened demand driven by a greater consumer focus on the home**, which the company met through its flexible global platform[226](index=226&type=chunk) - Cash and investments **decreased from $77.1 million to $46.9 million**, primarily due to the repayment of $38.4 million in borrowings from credit lines and a PPP loan that were drawn down in fiscal 2020[235](index=235&type=chunk)[236](index=236&type=chunk) [Segment Analysis](index=36&type=section&id=Segment%20Analysis) Both segments delivered strong top-line growth, with the Mattress Fabrics segment showing a substantial improvement in operating income and margin Mattress Fabrics Segment Performance (in thousands) | Metric | Fiscal 2021 | Fiscal 2020 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $157,671 | $131,412 | 20.0% | | Gross Profit | $23,864 | $16,278 | 46.6% | | Operating Income | $11,798 | $4,924 | 139.6% | | Operating Margin | 7.5% | 3.7% | +380bp | Upholstery Fabrics Segment Performance (in thousands) | Metric | Fiscal 2021 | Fiscal 2020 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $142,049 | $124,754 | 13.9% | | Gross Profit | $25,968 | $24,220 | 7.2% | | Operating Income | $11,876 | $9,867 | 20.4% | | Operating Margin | 8.4% | 7.9% | +50bp | - The Mattress Fabrics segment's sales growth was driven by **strong consumer demand, market share gains**, and growth in the sewn mattress cover business, boosting profitability despite cost pressures[250](index=250&type=chunk)[251](index=251&type=chunk)[254](index=254&type=chunk) - The Upholstery Fabrics segment saw a **significant sales increase in its residential business**, partially offset by lower sales in its hospitality business, leading to higher profitability[280](index=280&type=chunk)[286](index=286&type=chunk) [Liquidity and Capital Resources](index=45&type=section&id=Liquidity%20and%20Capital%20Resources) The company generated strong operating cash flow, repaid all outstanding borrowings, and plans to increase capital expenditures in fiscal 2022 - Net cash provided by operating activities was **$21.5 million in fiscal 2021**, a significant increase from $5.0 million in fiscal 2020, reflecting higher earnings and strong working capital management[237](index=237&type=chunk)[337](index=337&type=chunk) - Capital expenditures were **$6.7 million in fiscal 2021**, primarily related to the mattress fabrics segment, with projections to increase to **$9 million to $10 million for fiscal 2022**[363](index=363&type=chunk)[364](index=364&type=chunk) - As of May 2, 2021, the company had **no outstanding borrowings** under its U.S. or China lines of credit, having repaid all amounts drawn down during the prior year[338](index=338&type=chunk)[357](index=357&type=chunk) [Critical Accounting Estimates](index=48&type=section&id=Critical%20Accounting%20Estimates) Key accounting estimates involve inventory valuation, income tax valuation allowances, and stock-based compensation, with a full valuation allowance on U.S. deferred tax assets - Key critical accounting estimates include **inventory valuation**, determination of the **valuation allowance for income taxes**, and the calculation of stock-based compensation[370](index=370&type=chunk) - For inventory, the company provides markdowns based on aging categories and planned discontinuations, with a reserve for inventory markdowns of **$6.1 million** as of May 2, 2021[372](index=372&type=chunk)[375](index=375&type=chunk) - A **full valuation allowance of $11.7 million** was recorded against all U.S. net deferred income tax assets as of May 2, 2021, due to a recent history of cumulative U.S. taxable losses[378](index=378&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=50&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to market risks from interest rate changes and foreign currency fluctuations, which it attempts to mitigate through natural hedging - The company is exposed to **interest rate risk** on its U.S. revolving credit agreement, which is based on LIBOR; there were no borrowings outstanding as of May 2, 2021[389](index=389&type=chunk) - Culp is exposed to **foreign currency risk** from its operations in Canada and China, aiming to maintain a natural hedge by balancing local currency assets and liabilities[390](index=390&type=chunk) [Item 8. Consolidated Financial Statements and Supplementary Data](index=51&type=section&id=Item%208.%20Consolidated%20Financial%20Statements%20and%20Supplementary%20Data) This section contains the company's audited financial statements, which detail key events such as a business combination, a discontinued operation, and significant tax considerations [Notes to Consolidated Financial Statements](index=57&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Key notes detail the acquisition of the remaining interest in a joint venture, the sale of the Home Accessories segment, and the impairment of goodwill - **Note 2 - Business Combination:** Effective February 1, 2021, Culp acquired the remaining 50% ownership interest in its Haiti-based joint venture, Class International Holdings, Ltd. (CIH), resulting in a **gain on bargain purchase of $819,000**[493](index=493&type=chunk)[495](index=495&type=chunk)[498](index=498&type=chunk) - **Note 3 - Discontinued Operation:** The Home Accessories segment (eLuxury) was sold on March 31, 2020, and its results are presented as a discontinued operation, which recorded a **net loss of $17.5 million** in fiscal 2020[414](index=414&type=chunk)[520](index=520&type=chunk)[522](index=522&type=chunk) - **Note 9 - Goodwill:** As a result of **impairment charges totaling $27.2 million** in fiscal 2020, the company reported no goodwill on its balance sheet as of May 2, 2021, and May 3, 2020[574](index=574&type=chunk) - **Note 12 - Income Taxes:** The company recorded a **full valuation allowance of $11.7 million** against its U.S. net deferred tax assets due to a recent history of U.S. taxable losses, significantly impacting the effective tax rate[612](index=612&type=chunk)[614](index=614&type=chunk) [Item 9A. Controls and Procedures](index=103&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of the fiscal year-end - Management concluded that the company's **disclosure controls and procedures were effective** as of the end of the fiscal year[759](index=759&type=chunk) - Based on an assessment using the 2013 COSO framework, management concluded that the company's **internal control over financial reporting was effective** as of May 2, 2021[761](index=761&type=chunk) [PART III](index=106&type=section&id=PART%20III) [Items 10, 11, 12, 13, and 14](index=106&type=section&id=Items%2010%2C%2011%2C%2012%2C%2013%2C%20and%2014) Required information for these items is incorporated by reference from the company's forthcoming definitive Proxy Statement - Information regarding directors, executive officers, corporate governance, executive compensation, security ownership, related transactions, and accountant fees is **incorporated by reference** from the company's forthcoming definitive Proxy Statement[778](index=778&type=chunk)[780](index=780&type=chunk)[781](index=781&type=chunk)[785](index=785&type=chunk)[787](index=787&type=chunk) [PART IV](index=107&type=section&id=PART%20IV) [Item 15. Exhibits and Financial Statement Schedules](index=107&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the consolidated financial statements and exhibits filed with the report, noting the omission of financial statement schedules - The **consolidated financial statements** of Culp, Inc. are filed as part of this report[793](index=793&type=chunk) - All **financial statement schedules are omitted** because they are not applicable or the required information is included in the consolidated financial statements or notes[794](index=794&type=chunk)

| --- | --- | --- | --- | |----------------------|-------|-------|-------| | | | | | | | | | | | CULP, INC. | | | | | | | | | | Investor Information | | | | | June 23, 2021 | | | | 1 CULP FORWARD LOOKING STATEMENTS This presentation 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 inh ...

Culp, Inc. (NYSE:CULP) Q4 2021 Earnings Conference Call June 17, 2021 11:00 AM ET Company Participants Dru Anderson - Investor Relations Iv Culp - President and Chief Executive Officer Ken Bowling - Chief Financial Officer Boyd Chumbley - President of Upholstery Fabrics Conference Call Participants Budd Bugatch - Water Tower Research Anthony Lebiedzinski - Sidoti Marco Rodriguez - Stonegate Capital Markets Good day, and welcome to the Culp's Fourth Quarter 2021 Earnings Conference Call. Today's call is bein ...

Part I - Financial Information [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents Culp, Inc.'s unaudited consolidated financial statements for the quarter ended January 31, 2021, including income, balance sheet, cash flow, and equity statements with detailed notes [Consolidated Statements of Net Income (Loss)](index=4&type=section&id=Consolidated%20Statements%20of%20Net%20Income%20(Loss)) For Q3 FY2021, the company reported **$2.1 million** net income, a significant improvement from a **$4.2 million** net loss in the prior-year period, with net income from continuing operations more than doubling Consolidated Statements of Net Income (Loss) Highlights (in Millions, Except for Per Share Data) | Metric | Three Months Ended Jan 31, 2021 | Three Months Ended Feb 2, 2020 | Nine Months Ended Jan 31, 2021 | Nine Months Ended Feb 2, 2020 | | :--- | :--- | :--- | :--- | :--- | | **Net sales** | $79.3M | $68.5M | $220.7M | $208.8M | | **Gross profit from continuing operations** | $13.9M | $11.5M | $38.0M | $37.5M | | **Income from continuing operations** | $4.0M | $2.7M | $10.4M | $10.4M | | **Net income from continuing operations** | $2.1M | $1.0M | $1.7M | $5.1M | | **Net loss from discontinued operation** | $0.0M | ($5.2M) | $0.0M | ($5.9M) | | **Net income (loss)** | $2.1M | ($4.2M) | $1.7M | ($0.8M) | | **Net income (loss) per share - diluted** | $0.17 | ($0.34) | $0.14 | ($0.07) | [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets) As of January 31, 2021, total assets were **$212.0 million**, cash decreased to **$36.0 million** due to debt repayment, and total liabilities increased to **$83.6 million** primarily from accounts payable Key Balance Sheet Data (in Millions) | Account | Jan 31, 2021 | Feb 2, 2020 | May 3, 2020 | | :--- | :--- | :--- | :--- | | **Cash and cash equivalents** | $36.0M | $21.6M | $69.8M | | **Inventories** | $57.8M | $54.0M | $47.9M | | **Total current assets** | $148.6M | $120.9M | $151.7M | | **Total assets** | $212.0M | $212.1M | $215.1M | | **Accounts payable - trade** | $44.9M | $20.4M | $23.0M | | **Total current liabilities** | $62.4M | $32.8M | $40.1M | | **Total liabilities** | $83.6M | $52.0M | $85.4M | | **Total shareholders' equity** | $128.4M | $159.8M | $129.7M | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended January 31, 2021, operating activities provided **$21.7 million** cash, while investing activities used **$13.3 million** and financing activities used **$42.4 million** primarily for debt repayment Cash Flow Summary (Nine Months Ended, in Millions) | Activity | Jan 31, 2021 | Feb 2, 2020 | | :--- | :--- | :--- | | **Net cash provided by (used in) operating activities** | $21.7M | ($0.5M) | | **Net cash used in investing activities** | ($13.3M) | ($12.0M) | | **Net cash used in financing activities** | ($42.4M) | ($5.5M) | | **Decrease in cash and cash equivalents** | ($33.8M) | ($18.1M) | [Notes to Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section details accounting policies and financial results, including the sale of the Home Accessories segment, impairment charges, debt, tax complexities, and the acquisition of a Haitian joint venture - On March 31, 2020, the company sold its entire ownership in eLuxury, LLC, eliminating the home accessories segment, with results now presented as a discontinued operation[38](index=38&type=chunk) - In Q3 FY2020, the company recorded a reversal of a **$6.1 million** contingent consideration earn-out obligation related to the eLuxury acquisition, nullified upon its sale[55](index=55&type=chunk) - During Q3 FY2020, the company recorded asset impairment charges of **$13.6 million** for the discontinued operation, including **$11.2 million** for goodwill and **$2.4 million** for its tradename[47](index=47&type=chunk) - Effective February 1, 2021, the company acquired the remaining 50% ownership in its Haitian joint venture, Class International Holdings, Ltd. (CIH), for **$0.9 million**, making it a wholly-owned subsidiary[102](index=102&type=chunk) - The company received and subsequently repaid a **$7.6 million** Paycheck Protection Program (PPP) loan in Q4 FY2020 and Q1 FY2021, respectively, out of caution following new SBA guidance[118](index=118&type=chunk)[119](index=119&type=chunk) - Due to a U.S. tax law change regarding GILTI, the company recorded a **$3.5 million** non-cash tax benefit, but a history of U.S. taxable losses led to a **$7.0 million** non-cash charge for a full valuation allowance against U.S. net deferred tax assets[182](index=182&type=chunk)[184](index=184&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=60&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q3 and nine-month fiscal 2021 results, highlighting a **15.8%** sales increase driven by home-related spending, improved operating income, strong liquidity from debt repayment, and effective working capital management Overall Performance Summary (Q3 FY2021 vs Q3 FY2020) | Metric | Q3 FY2021 | Q3 FY2020 | Change | | :--- | :--- | :--- | :--- | | **Net Sales** | $79.3M | $68.5M | +15.8% | | **Gross Profit Margin** | 17.5% | 16.8% | +70bp | | **Income from Continuing Operations** | $4.0M | $2.7M | +48.2% | | **Net Income from Continuing Operations** | $2.1M | $1.0M | +103.1% | - The increase in net sales for both mattress and upholstery fabrics segments was driven by heightened consumer focus on the home environment during the COVID-19 pandemic[261](index=261&type=chunk) - Operating performance was pressured by unfavorable foreign exchange rate fluctuations in China and higher SG&A from increased incentive compensation costs[265](index=265&type=chunk) - The company's liquidity position is strong, with cash and investments of **$51.8 million** as of January 31, 2021, after repaying **$38.4 million** in borrowings during the fiscal year[270](index=270&type=chunk)[272](index=272&type=chunk) [Segment Analysis](index=65&type=section&id=Segment%20Analysis) This section details the performance of Mattress Fabrics and Upholstery Fabrics segments, both showing strong Q3 sales growth driven by consumer home spending and product success, despite weakness in hospitality Mattress Fabrics Segment Performance (Q3 FY2021 vs Q3 FY2020, in Millions) | Metric | Q3 FY2021 | Q3 FY2020 | Change | | :--- | :--- | :--- | :--- | | **Net Sales** | $38.6M | $33.5M | +15.1% | | **Income from Continuing Operations** | $3.3M | $1.8M | +85.4% | | **Operating Margin** | 8.5% | 5.3% | +320bp | - The Mattress Fabrics segment benefited from increased demand due to consumer focus on home, growth with new and existing customers, and the success of its fabric-to-cover model[284](index=284&type=chunk) Upholstery Fabrics Segment Performance (Q3 FY2021 vs Q3 FY2020, in Millions) | Metric | Q3 FY2021 | Q3 FY2020 | Change | | :--- | :--- | :--- | :--- | | **Net Sales** | $40.7M | $35.0M | +16.4% | | **Income from Continuing Operations** | $3.9M | $3.0M | +27.5% | | **Operating Margin** | 9.5% | 8.7% | +80bp | - Upholstery Fabrics growth was driven by the residential business and LiveSmart® products, while the hospitality business remained under pressure from the pandemic[312](index=312&type=chunk) [Liquidity and Capital Resources](index=81&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with **$51.8 million** in cash and investments, generated **$21.7 million** from operations, repaid **$38.4 million** in debt, reinstated its share repurchase program, and continues quarterly dividends - As of January 31, 2021, the company had cash and investments of **$51.8 million** and no outstanding borrowings under its lines of credit[365](index=365&type=chunk)[368](index=368&type=chunk) - Net cash provided by operating activities was **$21.7 million** for the first nine months of FY2021, a significant improvement from a use of **$0.5 million** in the prior year, reflecting higher earnings and strong working capital management[367](index=367&type=chunk) - The company's **$5.0 million** share repurchase program, temporarily suspended due to COVID-19, was reinstated on March 2, 2021[374](index=374&type=chunk)[375](index=375&type=chunk) - On March 2, 2021, the board approved a quarterly cash dividend of **$0.11 per share**[377](index=377&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=87&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risk from variable interest rates and foreign currency fluctuations in Canada and China, but minimizes interest rate risk with no outstanding borrowings and aims for natural hedges for currency exposure - The company is exposed to interest rate risk on its revolving credit agreements, with variable rates tied to LIBOR or determined by the Chinese government[404](index=404&type=chunk)[405](index=405&type=chunk) - The company is exposed to foreign currency risk from its Canadian and Chinese operations, using the U.S. dollar as functional currency and aiming for a natural hedge by balancing local currency assets and liabilities[406](index=406&type=chunk) [Controls and Procedures](index=87&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of January 31, 2021, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of January 31, 2021, the company's principal executive and financial officers concluded that disclosure controls and procedures were effective[407](index=407&type=chunk)[409](index=409&type=chunk) - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, these controls[410](index=410&type=chunk) Part II - Other Information [Legal Proceedings](index=90&type=section&id=Item%201.%20Legal%20Proceedings) No material changes to the company's legal proceedings were reported during the three months ended January 31, 2021, compared to the prior annual report - No material changes to legal proceedings were reported for the quarter[412](index=412&type=chunk) [Risk Factors](index=90&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the company's risk factors were reported during the three months ended January 31, 2021, compared to the prior annual report - No material changes to risk factors were reported for the quarter[413](index=413&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=90&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company did not repurchase any equity securities in Q3 FY2021, as its **$5.0 million** share repurchase program, temporarily suspended due to COVID-19, was reinstated on March 2, 2021 Issuer Purchases of Equity Securities (Q3 FY2021) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Approximate Dollar Value of Shares that May Yet Be Purchased | | :--- | :--- | :--- | :--- | | Nov 2, 2020 to Jan 31, 2021 | 0 | N/A | $5,000,000 | - The company's board of directors temporarily suspended the share repurchase program on April 3, 2020, and reinstated it on March 2, 2021[415](index=415&type=chunk) [Exhibits](index=91&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q report, including CEO/CFO certifications and Inline XBRL data files - Exhibits filed include CEO/CFO certifications (Rule 302 and Section 906) and Inline XBRL documents[417](index=417&type=chunk)[418](index=418&type=chunk)

Culp, Inc. (NYSE:CULP) Q3 2021 Earnings Conference Call March 4, 2021 11:00 AM ET Company Participants Dru Anderson - IR Iv Culp - President & CEO Ken Bowling - CFO Boyd Chumbley - President, Upholstery Fabrics Conference Call Participants Budd Bugatch - Water Tower Research Marco Rodriguez - Stonegate Capital Markets Anthony Lebiedzinski - Sidoti & Company Operator Please standby. Good day, ladies and gentlemen and welcome to the Culp's Third Quarter 2021 Earnings Conference Call. Today's call is being rec ...

| --- | --- | --- | --- | |----------------------|-------|-------|-------| | | | | | | | | | | | CULP, INC. | | | | | | | | | | Investor Information | | | | | March 3, 2021 | | | | 1 CULP FORWARD LOOKING STATEMENTS This presentation 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 inh ...

| --- | --- | --- | --- | |----------------------|-------|-------|-------| | | | | | | | | | | | CULP, INC. | | | | | | | | | | Investor Information | | | | | January 13, 2021 | | | | 1 CULP FORWARD LOOKING STATEMENTS This presentation 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 ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Name of Each Exchange Title of Each Class Trading Symbol(s) On Which Registered Common Stock, par value $.05/ Share CULP New York Stock Exchange Non-accelerated filer ☐ Smaller Reporting Company ☐ Emerging Growth Company ☐ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended November 1, 2020 Commission File No. 1-12597 CULP, INC. (Exact name of registrant as spe ...

Culp, Inc. (NYSE:CULP) Q2 2021 Earnings Conference Call December 4, 2020 11:00 AM ET Company Participants Dru Anderson - IR Iv Culp - CEO Ken Bowling - CFO Boyd Chumbley - President, Upholstery Fabrics Business Conference Call Participants Bobby Griffin - Raymond James Marco Rodriguez - Stonegate Capital Markets Operator Please standby we are about to begin. Good day and welcome to Culp's Second Quarter 2021 Earnings Conference Call. Today's call is being recorded. At this time, for opening remarks and intr ...