UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
Commission File No.
CULP, INC.
(Exact name of registrant as specified in its charter)
NORTH CAROLINA |
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(State or other jurisdiction of incorporation or other organization) |
(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
(zip code) |
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Name of Each Exchange |
Title of Each Class |
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Trading Symbol(s) |
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On Which Registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. ☒ YES NO ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period after the registrant was required to submit such files). ☒ YES NO ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Non-accelerated filer |
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Smaller Reporting Company |
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Emerging Growth Company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
Common shares outstanding at December 10, 2020:
Par Value: $0.05 per share
INDEX TO FORM 10-Q
For the period ended November 1, 2020
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Part I - Financial Statements |
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Item 1. |
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I-1 |
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I-1 |
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I-2 |
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Consolidated Balance Sheets — November 1, 2020, November 3, 2019, and May 3, 2020 |
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I-3 |
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Consolidated Statements of Cash Flows — Six Months Ended November 1, 2020, and November 3, 2019 |
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I-4 |
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Consolidated Statements of Shareholders’ Equity – Six Months Ended November 1, 2020 |
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I-5 |
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Consolidated Statements of Shareholders’ Equity – Six Months Ended November 3, 2019 |
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I-6 |
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I-7 |
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I-32 |
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Item 2. |
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Management's Discussion and Analysis of Financial Condition and Results of Operations |
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I-33 |
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Item 3. |
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I-47 |
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Item 4. |
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I-48 |
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Part II - Other Information |
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Item 1. |
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II-1 |
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Item 1A. |
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II-1 |
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Item 2. |
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II-1 |
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Item 6. |
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II-2 |
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II-3 |
Item 1: Financial Statements
CULP, INC.
CONSOLIDATED STATEMENTS OF NET INCOME (LOSS)
FOR THE THREE AND SIX MONTHS ENDED NOVEMBER 1, 2020 AND NOVEMBER 3, 2019
UNAUDITED
(Amounts in Thousands, Except for Per Share Data)
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THREE MONTHS ENDED |
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November 1, |
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November 3, |
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2020 |
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2019 |
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Net sales |
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$ |
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$ |
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Cost of sales |
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Gross profit from continuing operations |
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Selling, general and administrative expenses |
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Income from continuing operations |
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Interest expense |
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— |
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Interest income |
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Other expense |
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Income before income taxes from continuing operations |
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Income tax expense |
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Income (loss) from investment in unconsolidated joint venture |
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Net income from continuing operations |
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Loss before income taxes from discontinued operation |
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— |
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Income tax benefit |
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— |
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Net loss from discontinued operation |
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— |
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( |
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Net income |
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$ |
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$ |
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Net income from continuing operations per share - basic |
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$ |
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$ |
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Net income from continuing operations per share - diluted |
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$ |
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$ |
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Net loss from discontinued operation per share - basic |
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$ |
— |
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$ |
( |
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Net loss from discontinued operation per share - diluted |
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$ |
— |
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$ |
( |
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Net income per share - basic |
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$ |
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$ |
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Net income per share - diluted |
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$ |
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$ |
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Average shares outstanding, basic |
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Average shares outstanding, diluted |
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SIX MONTHS ENDED |
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November 1, |
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November 3, |
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2020 |
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2019 |
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Net sales |
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$ |
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$ |
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Cost of sales |
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( |
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Gross profit from continuing operations |
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Selling, general and administrative expenses |
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Restructuring credit |
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— |
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Income from continuing operations |
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Interest expense |
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Interest income |
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Other expense |
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( |
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( |
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Income before income taxes from continuing operations |
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Income tax expense |
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( |
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Income (loss) from investment in unconsolidated joint venture |
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Net (loss) income from continuing operations |
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Loss before income taxes from discontinued operation |
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— |
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Income tax benefit |
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— |
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Net loss from discontinued operation |
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— |
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( |
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Net (loss) income |
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$ |
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$ |
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Net (loss) income from continuing operations per share - basic |
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$ |
( |
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$ |
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Net (loss) income from continuing operations per share - diluted |
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$ |
( |
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$ |
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Net loss from discontinued operation per share - basic |
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$ |
— |
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$ |
( |
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Net loss from discontinued operation per share - diluted |
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$ |
— |
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$ |
( |
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Net (loss) income per share - basic |
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$ |
( |
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$ |
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Net (loss) income per share - diluted |
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$ |
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$ |
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Average shares outstanding, basic |
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Average shares outstanding, diluted |
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See accompanying notes to consolidated financial statements.
I-1
CULP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
FOR THE THREE AND SIX MONTHS ENDED NOVEMBER 1, 2020 AND NOVEMBER 3, 2019
UNAUDITED
(Amounts in Thousands)
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THREE MONTHS ENDED |
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November 1, |
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November 3, |
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2020 |
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2019 |
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Net income |
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$ |
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$ |
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Unrealized holding (losses) gains on investments, net of tax |
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( |
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Reclassification adjustment for realized loss on investments |
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— |
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Comprehensive income |
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$ |
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$ |
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Plus: Comprehensive loss attributable to noncontrolling interest associated with discontinued operation |
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— |
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Comprehensive income attributable to Culp, Inc. common shareholders |
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$ |
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$ |
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SIX MONTHS ENDED |
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November 1, |
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November 3, |
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2020 |
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2019 |
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Net (loss) income |
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$ |
( |
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$ |
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Unrealized holding gains on investments, net of tax |
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Reclassification adjustment for realized loss on investments |
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— |
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Comprehensive (loss) income |
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$ |
( |
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$ |
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Plus: Comprehensive loss attributable to noncontrolling interest associated with discontinued operation |
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— |
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Comprehensive (loss) income attributable to Culp, Inc. common shareholders |
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$ |
( |
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$ |
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See accompanying notes to consolidated financial statements.
I-2
CULP, INC.
CONSOLIDATED BALANCE SHEETS
NOVEMBER 1, 2020, NOVEMBER 3, 2019, AND MAY 3, 2020
UNAUDITED
(Amounts in Thousands)
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November 1, |
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November 3 |
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* May 3, |
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2020 |
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2019 |
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2020 |
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Current assets: |
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Cash and cash equivalents |
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$ |
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Short-term investments - held-to-maturity |
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— |
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Short-term investments - available for sale |
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— |
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Accounts receivable, net |
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Inventories |
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Current income taxes receivable |
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— |
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Current assets - discontinued operation |
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— |
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— |
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Other current assets |
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Total current assets |
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Property, plant and equipment, net |
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Goodwill |
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— |
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— |
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Intangible assets |
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Long-term investments - rabbi trust |
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Long-term investments - held-to-maturity |
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— |
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Right of use assets |
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Noncurrent income taxes receivable |
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— |
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— |
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Deferred income taxes |
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Investment in unconsolidated joint venture |
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Long-term note receivable affiliated with discontinued operation |
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— |
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— |
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Noncurrent assets - discontinued operation |
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— |
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— |
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Other assets |
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Total assets |
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$ |
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Current liabilities: |
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Line of credit - China operations |
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$ |
— |
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— |
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Paycheck Protection Program Loan |
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— |
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— |
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Accounts payable - trade |
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Accounts payable - capital expenditures |
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Operating lease liability - current |
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Deferred revenue |
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Accrued expenses |
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Accrued restructuring costs |
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— |
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— |
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Current liabilities - Discontinued operation |
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— |
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— |
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Income taxes payable - current |
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Total current liabilities |
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Line of credit - U.S. operations |
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— |
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— |
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Accrued expenses - long-term |
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— |
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Operating lease liability - noncurrent |
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Income taxes payable - long-term |
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Deferred income taxes |
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Deferred compensation |
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Contingent consideration affiliated with discontinued operation |
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— |
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— |
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Noncurrent liabilities - discontinued operation |
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— |
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— |
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Total liabilities |
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Commitments and Contingencies (Notes 10, 17 and 18) |
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Shareholders' equity |
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Preferred stock, $ |
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Common stock, $ and outstanding 2019; and |
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Capital contributed in excess of par value |
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Accumulated earnings |
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Accumulated other comprehensive income (loss) |
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( |
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Total shareholders' equity attributable to Culp, Inc. |
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Noncontrolling interest - discontinued operation |
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- |
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— |
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Total equity |
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Total liabilities and shareholders' equity |
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$ |
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*
See accompanying notes to consolidated financial statements.
I-3
CULP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED NOVEMBER 1, 2020 AND NOVEMBER 3, 2019
UNAUDITED
(Amounts in Thousands)
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SIX MONTHS ENDED |
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November 1, |
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November 3, |
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2020 |
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2019 |
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Cash flows from operating activities: |
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Net (loss) income |
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$ |
( |
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Adjustments to reconcile net (loss) income to net cash provided by operating activities: |
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Depreciation |
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Amortization |
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Stock-based compensation |
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Deferred income taxes |
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Gain on disposal of equipment |
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— |
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( |
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Realized loss on short-term investments available for sale |
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— |
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(Income) loss from investment in unconsolidated joint venture |
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( |
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Foreign currency exchange loss (gain) |
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( |
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Changes in assets and liabilities: |
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Accounts receivable |
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( |
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( |
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Inventories |
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( |
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Other current assets |
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( |
) |
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( |
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Other assets |
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( |
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Accounts payable – trade |
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Deferred revenue |
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( |
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( |
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Accrued expenses and deferred compensation |
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Accrued restructuring costs |
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— |
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( |
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Income taxes |
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Net cash provided by operating activities |
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Cash flows from investing activities: |
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Capital expenditures |
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( |
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( |
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Proceeds from the sale of equipment |
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Investment in unconsolidated joint venture |
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( |
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— |
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Proceeds from the maturity of short-term investments (Held to Maturity) |
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Purchase of short-term and long-term investments (Held to Maturity) |
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( |
) |
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— |
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Purchase of short-term investments (Available for Sale) |
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( |
) |
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— |
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Proceeds from the sale of short-term investments (Available for Sale) |
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— |
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Proceeds from the sale of long-term investments (rabbi trust) |
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— |
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Purchase of long-term investments (rabbi trust) |
|
|
( |
) |
|
|
( |
) |
Net cash (used in) provided by investing activities |
|
|
( |
) |
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Payments associated with lines of credit |
|
|
( |
) |
|
|
— |
|
Payments associated with Paycheck Protection Program Loan |
|
|
( |
) |
|
|
— |
|
Dividends paid |
|
|
( |
) |
|
|
( |
) |
Cash paid for acquisition of business |
|
|
— |
|
|
|
( |
) |
Proceeds from subordinated loan payable associated with the noncontrolling interest of discontinued operation |
|
|
— |
|
|
|
|
|
Capital contribution from noncontrolling interest associated with discontinued operation |
|
|
— |
|
|
|
|
|
Common stock surrendered for withholding taxes payable |
|
|
( |
) |
|
|
( |
) |
Payments of debt issuance costs |
|
|
( |
) |
|
|
— |
|
Net cash used in financing activities |
|
|
( |
) |
|
|
( |
) |
Effect of exchange rate changes on cash and cash equivalents |
|
|
|
|
|
|
( |
) |
(Decrease) increase in cash and cash equivalents |
|
|
( |
) |
|
|
|
|
Cash and cash equivalents at beginning of period |
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period (1) |
|
$ |
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
(1)
I-4
CULP, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
SIX-MONTH PERIOD ENDED NOVEMBER 1, 2020
UNAUDITED
(Dollars in thousands, except share data)
|
|
|
|
|||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
Capital |
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
Contributed |
|
|
|
|
|
|
Other |
|
|
Total |
|
|||
|
|
Common Stock |
|
|
in Excess |
|
|
Accumulated |
|
|
Comprehensive |
|
|
Shareholders' |
|
|||||||||
|
|
Shares |
|
|
Amount |
|
|
of Par Value |
|
|
Earnings |
|
|
(Loss) Income |
|
|
Equity |
|
||||||
Balance, May 3, 2020 * |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Unrealized gain on investments |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
Fully vested common stock award |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Dividends paid |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Balance, August 2, 2020 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Unrealized loss on investments |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Fully vested common stock award |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Common stock issued in connection with vesting of performance-based restricted stock units |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Common stock surrendered for withholding taxes payable |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Dividends paid |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Balance, November 1, 2020 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
* |
Derived from audited financial statements. |
See accompanying notes to consolidated financial statements
I-5
CULP, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
SIX-MONTH PERIOD ENDED NOVEMBER 3, 2019
UNAUDITED
(Dollars in thousands, except share data)
|
|
Shareholders’ equity attributable to Culp Inc. |
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital |
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
Noncontrolling |
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
Contributed |
|
|
|
|
|
|
Other |
|
|
|
|
|
|
Interest |
|
|
|
|
|
|||
|
|
Common Stock |
|
|
in Excess |
|
|
Accumulated |
|
|
Comprehensive |
|
|
|
|
|
|
Discontinued |
|
|
Total |
|
||||||||||
|
|
Shares |
|
|
Amount |
|
|
of Par Value |
|
|
Earnings |
|
|
Income |
|
|
Total |
|
|
Operation |
|
|
Equity |
|
||||||||
Balance, April 28, 2019 * |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Net income (loss) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
( |
) |
|
|
|
|
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
Unrealized gain on investments |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
Common stock issued in connection with vesting of performance based restricted stock units |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Fully vested common stock award |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Common stock surrendered for withholding taxes payable |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Dividends paid |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Capital contribution from non-controlling interest associated with discontinued operation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
Balance, August 4, 2019 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Net income (loss) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
( |
) |
|
|
|
|
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
Unrealized gain on investments |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
Common stock issued in connection with vesting of performance based restricted stock units |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Fully vested common stock award |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Common stock surrendered for withholding taxes payable |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Dividends paid |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Capital contribution from non-controlling interest associated with discontinued operation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
Balance, November 3, 2019 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
* |
Derived from audited financial statements. |
See accompanying notes to consolidated financial statements.
I-6
Culp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of Culp, Inc. and its majority-owned subsidiaries (the “company”) include all adjustments, which are, in the opinion of management, necessary for fair presentation of the results of operations and financial position. All of these adjustments are of a normal recurring nature. Results of operations for interim periods may not be indicative of future results. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements, which are included in the company’s annual report on Form 10-K filed with the Securities and Exchange Commission on July 17, 2020, for the fiscal year ended May 3, 2020.
The company’s six-months ended November 1, 2020, and November 3, 2019, represent 26-week and 27-week periods, respectively.
2. Significant Accounting Policies
As of November 1, 2020, there were no changes in the nature of our significant accounting policies or the application of those policies from those reported in our annual report on Form 10-K for the year then ended May 3, 2020.
Recently Adopted Accounting Pronouncements
Current Expected Credit Losses (“CECL”)
In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which requires entities to use a forward looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables. The FASB has subsequently issued updates to the standard to provide additional clarification on specific topics. Topic 326 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. As a result, we adopted the provisions of Topic 326 on May 4, 2020 and applied this guidance through the second quarter of fiscal 2021. The adoption of Topic 326 did not have an impact on our financial position, results of operations, or cash flows. See Notes 4 and 11 of our consolidated financial statements for further details of the adoption of CECL as of May 4, 2020 and our assessments and conclusions as of November 1, 2020.
Recently Issued Accounting Pronouncements
Income Taxes
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. We are required to apply this guidance in our fiscal 2022 interim and annual financial statements. Currently we do not expect this standard to affect our consolidated financial statements and related disclosures.
There are no other new recent accounting pronouncements that are expected to have a material impact on our consolidated financial statements.
3. |
HOME ACCESSORIES SEGMENT – DISCONTINUED OPERATION |
Overview
On March 31, 2020, we sold our entire ownership interest in eLuxury, LLC (“eLuxury”) to eLuxury’s noncontrolling interest holder in consideration of an accelerated settlement of certain financial obligations due and payable by eLuxury to us and the entry into supply and royalty arrangements designed to preserve an additional sales channel for our core products. Also, this sale, which was part of our comprehensive response to the challenging business conditions arising from the COVID-19 global pandemic, has allowed us to focus on our core businesses of upholstery and mattress fabrics and has been a factor in the increase of our liquidity through the first half of fiscal 2021.
In connection with the sale of our entire ownership interest in eLuxury, (i) we received $
I-7
entered into an amended and restated credit and security agreement with eLuxury and the buyer (the former noncontrolling interest holder) (together, the “Borrowers”), pursuant to which the Borrowers agreed to repay an additional $
The remaining $
Discontinued Operation Financial Statement Presentation and Disclosures
Financial Statement Presentation
Due to the sale of our entire ownership interest in eLuxury, our home accessories segment was eliminated. Consequently, we determined that the results from operations and assets and liabilities associated with our home accessories segment were to be excluded from our continuing operations and presented as a discontinued operation in our consolidated financial statements in accordance with ASC Topic 205-20-45. As a result, we classified the results from operations of our home accessories segment separately in captions titled “Discontinued Operation” on our Consolidated Statement of Net Income for the three-month and six-month periods ending November 3, 2019. Additionally, assets and liabilities associated with our home accessories segment as of November 3, 2019, were reclassified from certain amounts reported in the prior period to present separately in captions titled “current assets – discontinued operation”, “noncurrent assets – discontinued operation”, “current liabilities - discontinued operation”, and “noncurrent liabilities – discontinued operation” to conform to current year financial statement presentation.
Consolidated Balance Sheet
The following is a summary of the assets and liabilities of the disposal group that are presented separately as a discontinued operation on the Consolidated Balance Sheet as of November 3, 2019.
|
|
November 3 |
|
|
(dollars in thousands) |
|
2019 |
|
|
ASSETS |
|
|
|
|
current assets: |
|
|
|
|
cash and cash equivalents |
|
$ |
|
|
accounts receivable |
|
|
|
|
inventories |
|
|
|
|
other current assets |
|
|
|
|
total current assets - discontinued operation |
|
|
|
|
property, plant, and equipment |
|
|
|
|
goodwill |
|
|
|
|
intangible asset |
|
|
|
|
right of use asset |
|
|
|
|
total noncurrent assets - discontinued operation |
|
|
|
|
total assets |
|
$ |
|
|
LIABILITIES AND NET ASSETS |
|
|
|
|
current liabilities: |
|
|
|
|
accounts payable |
|
$ |
|
|
operating lease liability - current |
|
|
|
|
accrued expenses |
|
|
|
|
total current liabilities - discontinued operation |
|
|
|
|
loan payable - Culp Inc. |
|
|
|
|
subordinated loan payable - noncontrolling interest |
|
|
|
|
operating lease liability - long-term |
|
|
|
|
total noncurrent liabilities - discontinued operation |
|
|
|
|
total liabilities |
|
|
|
|
total net assets of discontinued operation |
|
$ |
|
|
I-8
Net Loss from Discontinued Operation
The following is a summary of the major classes of financial statement line items constituting loss before income taxes from discontinued operation that are presented in the Consolidated Statements of Net Income for the three-month and six-month periods ending November 3, 2019:
|
|
Three Months Ended |
|
|
|
|
November 3, |
|
|
(dollars in thousands) |
|
2019 |
|
|
net sales |
|
$ |
|
|
cost of sales |
|
|
( |
) |
gross profit |
|
|
|
|
selling, general and administrative expenses |
|
|
( |
) |
interest expense (1) |
|
|
( |
) |
other income |
|
|
|
|
loss before income taxes from discontinued operation |
|
|
( |
) |
income tax benefit |
|
|
|
|
net loss from discontinued operation |
|
$ |
( |
) |
|
|
Six Months Ended |
|
|
|
|
November 3, |
|
|
(dollars in thousands) |
|
2019 |
|
|
net sales |
|
$ |
|
|
cost of sales |
|
|
( |
) |
gross profit |
|
|
|
|
selling, general and administrative expenses |
|
|
( |
) |
interest expense (1) |
|
|
( |
) |
other income |
|
|
|
|
loss before income taxes from discontinued operation |
|
|
( |
) |
income tax benefit |
|
|
|
|
net loss from discontinued operation |
|
$ |
( |
) |
(1) |
Interest expense is directly attributable to our discontinued operation as it pertains to the loans payable assumed by the buyer (the former noncontrolling interest holder) or required to be paid to Culp, Inc. based on the terms of the sale agreement. |
The following is a summary of net income (loss) from continuing operations, net loss from discontinued operation, and net income (loss) attributable to Culp, Inc. common shareholders and the noncontrolling interest associated with our discontinued operation for the three-month and six-month periods ending November 1, 2020, and November 3, 2019:
|
|
Three Months Ended |
|
|||||
|
|
November 1, |
|
|
November 3, |
|
||
(dollars in thousands) |
|
2020 |
|
|
2019 |
|
||
net income from continuing operations |
|
$ |
|
|
|
$ |
|
|
net loss from continuing operations attributable to noncontrolling interest |
|
|
— |
|
|
|
— |
|
net income from continuing operations attributable to Culp, Inc. common shareholders |
|
$ |
|
|
|
$ |
|
|
net loss from discontinued operation |
|
$ |
— |
|
|
$ |
( |
) |
net loss from discontinued operation attributable to noncontrolling interest |
|
|
— |
|
|
|
|
|
net income from discontinued operation attributable to Culp, Inc. common shareholders |
|
$ |
— |
|
|
$ |
|
|
net income |
|
$ |
|
|
|
$ |
|
|
net loss from noncontrolling interest associated with a discontinued operation |
|
|
— |
|
|
|
|
|
net income attributable to Culp, Inc. common shareholders |
|
$ |
|
|
|
$ |
|
|
I-9
|
|
Six Months Ended |
|
|||||
|
|
November 1, |
|
|
November 3, |
|
||
(dollars in thousands) |
|
2020 |
|
|
2019 |
|
||
net (loss) income from continuing operations |
|
$ |
( |
) |
|
$ |
|
|
net loss from continuing operations attributable to noncontrolling interest |
|
|
— |
|
|
|
— |
|
net (loss) income from continuing operations attributable to Culp, Inc. common shareholders |
|
$ |
( |
) |
|
$ |
|
|
net loss from discontinued operation |
|
$ |
— |
|
|
$ |
( |
) |
net loss from discontinued operation attributable to noncontrolling interest |
|
|
— |
|
|
|
|
|
net loss from discontinued operation attributable to Culp, Inc. common shareholders |
|
$ |
— |
|
|
$ |
( |
) |
net (loss) income |
|
$ |
( |
) |
|
$ |
|
|
net loss from noncontrolling interest associated with a discontinued operation |
|
|
— |
|
|
|
|
|
net (loss) income attributable to Culp, Inc. common shareholders |
|
$ |
( |
) |
|
$ |
|
|
Cash Flow Disclosures
Our discontinued operation had net cash used in operating activities totaling $
Continuing Obligations, Financial Commitments, and Continuing Relationships with the Discontinued Operation
Supply and Royalty Agreements
In connection with the sale of our entire ownership interest in eLuxury, we entered into supply and royalty agreements with eLuxury to preserve an additional sales channel for our core products – upholstery and mattress fabrics. The supply agreement requires eLuxury to purchase all its requirements at fair market prices for mattress and upholstery fabric products of the type we were supplying to eLuxury at the time of the sale transaction, as well as certain home accessories and soft good products, subject to our ability to provide competitive pricing and delivery terms for such products. The royalty agreement requires eLuxury to pay us a royalty fee based on a percentage of sales, as defined in the royalty agreement, for sales of eLuxury’s products to certain business-to-business customers, including customers which we referred to eLuxury prior to the sale transaction and new customer relationships we develop for eLuxury going forward, as well as sales of eLuxury products generated by sales representatives that we develop or introduce to eLuxury.
There are no guarantees or provisions under either the supply or royalty agreements that require eLuxury to purchase a minimum amount of our products or sell a certain amount of eLuxury products to customers or through sales representatives developed or introduced by us. As a result, the success of these agreements and the period of time in which our involvement with eLuxury is expected to continue are based on eLuxury’s ability to sell products that require mattress and upholstery fabrics and our ability to provide an additional sales channel for eLuxury to grow its business-to-business sales platform.
As a result of our continuing involvement with eLuxury, we reported net sales and the related cost of sales associated with our inventory shipments to eLuxury in accordance with Topic 205-20-50-4B, which requires us to report these transactions in continuing operations in our Consolidated Statement of Net Income for the three-month and six-month periods ending November 3, 2019. Therefore, we reported both net sales and cost of sales from continuing operations totaling $
I-10
During the three-month and six-month periods ending November 1, 2020, shipments to eLuxury under the supply agreement totaled $
Financial Guarantee
Currently, we have an agreement that guarantees
4. Allowance for Doubtful Accounts
A summary of the activity in the allowance for doubtful accounts follows:
|
|
Six Months Ended |
|
|||||
(dollars in thousands) |
|
November 1, 2020 |
|
|
November 3, 2019 |
|
||
Beginning balance |
|
$ |
|
|
|
$ |
|
|
Provision for bad debts |
|
|
|
|
|
|
( |
) |
Net write-offs, net of recoveries |
|
|
— |
|
|
|
— |
|
Ending balance |
|
$ |
|
|
|
$ |
|
|
During the six-month period ended November 1, 2020, we assessed the credit risk of our customers within our accounts receivable portfolio. Our risk assessment includes the respective customer’s (i) financial position; (ii) past payment history; (iii) management’s general ability; (iv) historical loss experience; and (v) the ongoing economic uncertainty associated with the COVID-19 global pandemic. After our risk assessment was completed, we assigned credit grades to our customers, which in turn, were used to determine our allowance for doubtful accounts totaling $
5. Revenue from Contracts with Customers
Nature of Performance Obligations
Continuing Operations
Our continuing operations are classified into
Our primary performance obligations include the sale of mattress fabrics and upholstery fabrics, as well as the performance of customized fabrication and installation services of Read’s own products associated with window treatments.
Discontinued Operation – Home Accessories Segment
As disclosed in Note 3 of the consolidated financial statements, we sold our entire ownership interest in eLuxury on March 31, 2020, and consequently our home accessories segment was eliminated at such time. Thus, the results of operations associated with our home accessories segment were excluded from our continuing operations and are presented as a discontinued operation in our consolidated financial statements.
The home accessories segment was our finished products business that manufactured, sourced, and sold bedding accessories and home goods directly to consumers and businesses through global e-commerce, business-to-business, and other sales channels.
Prior to its disposal, our former home accessories segment reported net sales totaling $
I-11
Contract Assets & Liabilities
Certain contracts, primarily those for customized fabrication and installation services associated with Read, require upfront customer deposits that result in a contract liability which is recorded on the Consolidated Balance Sheets as deferred revenue. If upfront deposits or prepayments are not required, customers may be granted credit terms which generally range from 15 –
A summary of the activity associated with deferred revenue for the six-month periods ended November 1, 2020, and November 3, 2019, follows:
|
|
Six months ended |
|
|||||
(dollars in thousands) |
|
November 1, 2020 |
|
|
November 3, 2019 |
|
||
Beginning balance |
|
$ |
|
|
|
$ |
|
|
Revenue recognized on contract liabilities |
|
|
( |
) |
|
|
( |
) |
Payments received for services not yet rendered |
|
|
|
|
|
|
|
|
Ending balance |
|
$ |
|
|
|
$ |
|
|
Disaggregation of Revenue
The following table presents our disaggregated revenue by segment, timing of revenue recognition, and product sales versus services rendered for the three-month period ending November 1, 2020:
|
|
Mattress |
|
|
Upholstery |
|
|
|
|
|
||
(dollars in thousands) |
|
Fabrics |
|
|
Fabrics |
|
|
Total |
|
|||
Products transferred at a point in time |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Services transferred over time |
|
|
— |
|
|
|
|
|
|
|
|
|
Total Net Sales |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
The following table presents our disaggregated revenue by segment, timing of revenue recognition, and product sales versus services rendered for the six-month period ending November 1, 2020:
|
|
Mattress |
|
|
Upholstery |
|
|
|
|
|
||
(dollars in thousands) |
|
Fabrics |
|
|
Fabrics |
|
|
Total |
|
|||
Products transferred at a point in time |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Services transferred over time |
|
|
— |
|
|
|
|
|
|
|
|
|
Total Net Sales |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
The following table presents our disaggregated revenue by segment, timing of revenue recognition, and product sales versus services rendered for the three-month period ending November 3, 2019:
|
|
Mattress |
|
|
Upholstery |
|
|
|
|
|
||
(dollars in thousands) |
|
Fabrics |
|
|
Fabrics |
|
|
Total |
|
|||
Products transferred at a point in time |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Services transferred over time |
|
|
— |
|
|
|
|
|
|
|
|
|
Total Net Sales |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
The following table presents our disaggregated revenue by segment, timing of revenue recognition, and product sales versus services rendered for the six-month period ending November 3, 2019:
|
|
Mattress |
|
|
Upholstery |
|
|
|
|
|
||
(dollars in thousands) |
|
Fabrics |
|
|
Fabrics |
|
|
Total |
|
|||
Products transferred at a point in time |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Services transferred over time |
|
|
— |
|
|
|
|
|
|
|
|
|
Total Net Sales |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
I-12
6. Inventories
Inventories are carried at the lower of cost or net realizable value. Cost is determined using the FIFO (first-in, first-out) method.
A summary of inventories follows:
(dollars in thousands) |
|
November 1, 2020 |
|
|
November 3, 2019 |
|
|
May 3, 2020 |
|
|||
Raw materials |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Work-in-process |
|
|
|
|
|
|
|
|
|
|
|
|
Finished goods |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
(1) |
$ |
|
|
(1) |
|
7. Intangible Assets
A summary of intangible assets follows:
(dollars in thousands) |
|
November 1, 2020 |
|
|
November 3, 2019 |
|
|
|
May 3, 2020 |
|
|||
Tradenames |
|
$ |
|
|
|
$ |
|
|
|
|
$ |
|
|
Customer relationships, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-compete agreement, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
(1) |
|
$ |
|
|
(1) |
As of November 3, 2019, intangible assets totaled $ |
Tradenames
Our tradename totaling $
However, during our annual assessment as of May 3, 2020, we performed a qualitative assessment in which we concluded that it was more-likely-than-not that the fair value of Read’s tradename was less than its carrying amount. This conclusion was based on impairment indicators that existed, such as our unfavorable financial performance during the fourth quarter of fiscal 2020 and the significant decline in the price per share of our common stock and market capitalization stemming from the COVID-19 global pandemic. Since we determined it was more-likely-than-not that the fair market value of Read’s tradename was less than its carrying amount, we performed a quantitative impairment test. Our quantitative impairment test involved determining the fair value of Read’s tradename and comparing the respective fair value of Read’s tradename with its carrying amount. Consequently, based on our quantitative impairment test, we recorded an asset impairment charge totaling $
As a result of our quantitative impairment test, we determined the fair value of our tradename was $
Customer Relationships
A summary of the change in the carrying amount of our customer relationships follows:
|
|
Six months ended |
|
|||||
(dollars in thousands) |
|
November 1, 2020 |
|
|
November 3, 2019 |
|
||
Beginning balance |
|
$ |
|
|
|
$ |
|
|
Amortization expense |
|
|
( |
) |
|
|
( |
) |
Ending balance |
|
$ |
|
|
|
$ |
|
|
I-13
Our customer relationships are amortized on a straight-line basis over useful lives ranging from
The gross carrying amount of our customer relationships was $
The remaining amortization expense for the next five fiscal years and thereafter follows: FY 2021 - $
The weighted average amortization period for our customer relationships is
Non-Compete Agreement
A summary of the change in the carrying amount of our non-compete agreement follows:
|
|
Six months ended |
|
|||||
(dollars in thousands) |
|
November 1, 2020 |
|
|
November 3, 2019 |
|
||
Beginning balance |
|
$ |
|
|
|
$ |
|
|
Amortization expense |
|
|
( |
) |
|
|
( |
) |
Ending balance |
|
$ |
|
|
|
$ |
|
|
Our non-compete agreement is amortized on a straight-line basis over the
life of the agreement.The gross carrying amount of our non-compete agreement was $
The remaining amortization expense for the next five years and thereafter follows: FY 2021 - $
The weighted average amortization period for the non-compete agreement is
8. Investment in Unconsolidated Joint Venture
Culp International Holdings, Ltd. (“Culp International”), a wholly-owned subsidiary of the company, entered into a joint venture agreement pursuant to which Culp International owns
On December 20, 2019, CLIH entered into an agreement to construct an additional plant facility totaling
CLIH reported net income totaling $
The following table summarizes information on assets, liabilities, and members’ equity of our equity method investment in CLIH:
(dollars in thousands) |
|
November 1, 2020 |
|
|
November 3, 2019 |
|
|
May 3, 2020 |
|
|||
Total assets |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Total liabilities |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Total members’ equity |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
As of November 1, 2020, November 3, 2019, and May 3, 2020, our investment in CLIH totaled $
I-14
9. Accrued Expenses
A summary of accrued expenses follows:
(dollars in thousands) |
|
November 1, 2020 |
|
|
November 3, 2019 |
|
|
May 3, 2020 |
|
|||
Compensation, commissions and related benefits |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Interest |
|
|
— |
|
|
|
|
|
|
|
|
|
Other accrued expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
As of November 1, 2020, our entire accrued expenses totaling $
10. Lines of Credit and Paycheck Protection Program Loan
Revolving Credit Agreement – United States
Our Credit Agreement (“Credit Agreement”) with Wells Fargo Bank, N.A. (“Wells Fargo”) provides a revolving loan commitment of $
Interest is charged at a rate (applicable interest rate of
As a result of the COVID-19 global pandemic and the uncertainty relating to the unknown duration and overall effect on the company, we proactively took a precautionary measure and borrowed the maximum amount available from this line of credit during the fourth quarter of fiscal 2020. Consequently, we had outstanding borrowings of $
As of November 1, 2020, November 3, 2019, and May 3, 2020, there were $
Seventh Amendment to the Credit Agreement
Effective June 30, 2020, we entered into a Seventh Amendment to our Credit Agreement (the “Seventh Amendment”) which includes provisions that (i) modify the method for calculating the company’s debt to EBITDA covenant under the Credit Agreement solely during the temporary period beginning on the date of the Seventh Amendment and ending on the Rate Determination Date (as defined in the Credit Agreement), following the end of the company’s fiscal 2021 fourth quarter (such temporary period, the “Modification Period,”), and (ii) amend the pricing matrix used to determine the interest rate payable on loans made under the Credit Agreement solely during the Modification Period.
Specifically, the Seventh Amendment provides that during Modification Period, the company’s ratio of debt to EBITDA shall be determined by excluding the fourth quarter of fiscal 2020 from the calculation thereof, such that the ratio shall be determined using the four most recent quarterly periods other than (i.e. excluding) the fourth quarter of fiscal 2020, rather than calculating on a rolling four-quarter basis. It further provides that during the Modification Period, the Applicable Margin (as defined in the Credit Agreement) set forth the pricing matrix is increased to
Additionally, the Seventh Amendment (i) changes the capital expenditure covenant by reducing permitted annual capital expenditures to $
I-15
Revolving Credit Agreements – China Operations
Denominated in Chinese Yuan Renminbi (“RMB”)
We have an unsecured credit agreement denominated in Chinese Renminbi with a bank located in China that provides for a line of credit up to
On December 1, 2020, we renewed this agreement to extend the expiration date to December 1, 2021, and maintain our borrowing capacity of 40 million RMB’s.
Denominated in United States Dollar (“USD”)
We have an unsecured credit agreement denominated in USD with another bank located in China that provides for a line of credit up to $
Small Business Administration - Paycheck Protection Program
On April 15, 2020, we received a loan of $
Following our application and receipt of the Loan, the SBA and U.S. Treasury Department issued new guidance regarding eligibility requirements under the PPP, raising questions regarding the eligibility of publicly traded companies to receive loans under the program. As a result, out of an abundance of caution, we voluntarily repaid the Loan in full on May 13, 2020.
Overall
Our loan agreements require, among other things, that we maintain compliance with certain financial covenants. As of November 1, 2020, we were in compliance with these financial covenants.
11. Fair Value
ASC Topic 820 establishes a fair value hierarchy that distinguishes between assumptions based on market data (observable inputs) and the company’s assumptions (unobservable inputs). Determining where an asset or liability falls within that hierarchy depends on the lowest level input that is significant to the fair value measurement as a whole. An adjustment to the pricing method used within either level 1 or level 2 inputs could generate a fair value measurement that effectively falls in a lower level in the hierarchy.
The hierarchy consists of three broad levels as follows:
Level 1 – Quoted market prices in active markets for identical assets or liabilities.
Level 2 – Inputs other than level 1 inputs that are either directly or indirectly observable.
Level 3 – Unobservable inputs developed using the company’s estimates and assumptions, which reflect those that market participants would use.
The determination of where an asset or liability falls in the hierarchy requires significant judgment. We evaluate our hierarchy disclosures each quarter based on various factors and it is possible that an asset or liability may be classified differently from quarter to quarter. However, we expect that changes in classifications between different levels will be rare.
I-16
Recurring Basis
The following table presents information about assets measured at fair value on a recurring basis:
|
|
Fair value measurements as of November 1, 2020 using: |
|
|||||||||
|
|
Quoted prices |
|
|
Significant |
|
|
|
|
|
|
|
|
|
in active |
|
|
other |
|
Significant |
|
|
|
|
|
|
|
markets for |
|
|
observable |
|
unobservable |
|
|
|
|
|
|
|
identical assets |
|
|
inputs |
|
inputs |
|
|
|
|
|
(amounts in thousands) |
|
Level 1 |
|
|
Level 2 |
|
Level 3 |
|
Total |
|
||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Premier Money Market Fund |
|
$ |
|
|
|
N/A |
|
N/A |
|
$ |
|
|
Short Term Bond Funds |
|
|
|
|
|
N/A |
|
N/A |
|
|
|
|
Growth Allocation Fund |
|
|
|
|
|
N/A |
|
N/A |
|
|
|
|
Moderate Allocation Fund |
|
|
|
|
|
N/A |
|
N/A |
|
|
|
|
Other |
|
|
|
|
|
N/A |
|
N/A |
|
|
|
|
|
|
Fair value measurements as of November 3, 2019 using: |
|
|||||||||
|
|
Quoted prices |
|
|
Significant |
|
|
|
|
|
|
|
|
|
in active |
|
|
other |
|
Significant |
|
|
|
|
|
|
|
markets for |
|
|
observable |
|
unobservable |
|
|
|
|
|
|
|
identical assets |
|
|
inputs |
|
inputs |
|
|
|
|
|
(amounts in thousands) |
|
Level 1 |
|
|
Level 2 |
|
Level 3 |
|
Total |
|
||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Premier Money Market Fund |
|
$ |
|
|
|
N/A |
|
N/A |
|
$ |
|
|
Growth Allocation Fund |
|
|
|
|
|
N/A |
|
N/A |
|
|
|
|
Moderate Allocation Fund |
|
|
|
|
|
N/A |
|
N/A |
|
|
|
|
Other |
|
|
|
|
|
N/A |
|
N/A |
|
|
|
|
|
|
Fair value measurements as of May 3, 2020 using: |
|
|||||||||
|
|
Quoted prices |
|
|
Significant |
|
|
|
|
|
|
|
|
|
in active |
|
|
other |
|
Significant |
|
|
|
|
|
|
|
markets for |
|
|
observable |
|
unobservable |
|
|
|
|
|
|
|
identical assets |
|
|
inputs |
|
inputs |
|
|
|
|
|
(amounts in thousands) |
|
Level 1 |
|
|
Level 2 |
|
Level 3 |
|
Total |
|
||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Premier Money Market Fund |
|
$ |
|
|
|
N/A |
|
N/A |
|
$ |
|
|
Short Term Bond Funds |
|
|
|
|
|
N/A |
|
N/A |
|
|
|
|
Growth Allocation Fund |
|
|
|
|
|
N/A |
|
N/A |
|
|
|
|
Moderate Allocation Fund |
|
|
|
|
|
N/A |
|
N/A |
|
|
|
|
Other |
|
|
|
|
|
N/A |
|
N/A |
|
|
|
|
Short-Term Investments – Available for Sale
Our short-term investments classified as available for sale consisted of short-term bond mutual funds and had an accumulated unrealized loss totaling $
Short-Term and Long-Term Investments - Held-To-Maturity
Our investments classified as held-to-maturity consisted of investment grade U.S. corporate bonds, foreign bonds, and government bonds with original maturities that range from
As of November 1, 2020, and May 3, 2020, our held-to-maturity investments recorded at amortized cost totaled $
I-17
Our bond investments were classified as level 2 as they were traded over the counter within a broker network and not on an active market. The fair value of our bond investments was determined based on a published source that provided an average bid price. The average bid price was based on various broker prices that were determined based on market conditions, interest rates, and the rating of the respective bond investment.
Current Expected Credit Loses (“CECL”)- Available for Sale and Held-To-Maturity Investments
As of May 4, 2020, we did not have an allowance for credit losses related to our short-term available for sale and held-to-maturity investments, which are comprised mostly of fixed income securities that are predominantly high-grade U.S. and foreign corporate bonds, U.S. Treasury bonds, and short-term mutual bond funds.
As a result of our adoption of Topic 326 effective May 4, 2020, we determined that our credit loss exposure was immaterial due to the short-term nature of our mutual bond funds, and we have experienced historically low unrealized losses and gains during past reporting periods. In addition, it is not our intention to sell, and it is not likely that we will be required to sell, our held-to-maturity investments before the recovery of their amortized cost basis.
As of November 1, 2020, we reported an accumulated unrealized loss of $
Long-Term Investments - Rabbi Trust
We have a rabbi trust to set aside funds for participants of our deferred compensation plan (the “Plan”), which enables its participants to credit their contributions to various investment options of the Plan. The investments associated with the rabbi trust consist of a money market fund and various mutual funds that are classified as available for sale.
The long-term investments associated with our rabbi trust were recorded at their fair values of $
Other
The carrying amount of our cash and cash equivalents, accounts receivable, other current assets, accounts payable, and accrued expenses approximates fair value because of the short maturity of these financial instruments.
Nonrecurring Basis – Fourth Quarter Fiscal 2020
Continuing Operations
In accordance with ASC Topic 350 Intangibles – Goodwill and Other, we are required to assess our goodwill and tradename for impairment annually or between annual tests if we believe indicators of impairment exist. Accordingly, we performed our annual assessment of goodwill associated with our mattress fabrics segment and goodwill and tradename affiliated with Read as of May 3, 2020. Based on our qualitative assessment we concluded that impairment indicators existed, such as our unfavorable financial performance during the fourth quarter of fiscal 2020 and the significant decline in the price per share of our common stock and market capitalization stemming from the COVID-19 global pandemic. As a result, we determined it was more-likely-than-not that the goodwill associated with our mattress fabrics segment and the goodwill and tradename affiliated with Read were impaired, and therefore, we conducted quantitative asset impairment tests. Consequently, based on the results of our quantitative asset impairment tests as of May 3, 2020, we recorded an asset impairment charge totaling $
Our fair values associated with our goodwill and tradename were determined using a discounted cash flow and the relief from royalty methods, respectively. These methods used significant unobservable inputs, and therefore, the fair values of our goodwill and tradename were classified within level 3 of the fair value hierarchy.
I-18
Discontinued Operation – Home Accessories Segment
During the fourth quarter of fiscal 2020, we recorded asset impairment charges totaling $
12. Cash Flow Information
Interest and income taxes paid (refunded) are as follows:
|
|
Six months ended |
|
|||||
(dollars in thousands) |
|
November 1, 2020 |
|
|
November 3, 2019 |
|
||
Interest |
|
$ |
|
|
|
$ |
|
|
Income taxes (1) (2) |
|
|
( |
) |
|
|
|
|
(1) |
|
(2) |
|
13. Net Income (Loss) from Continuing Operations Per Share
Basic net income (loss) from continuing operations per share is computed using the weighted-average number of shares outstanding during the period. Diluted net income (loss) from continuing operations per share uses the weighted-average number of shares outstanding during the period plus the dilutive effect of stock-based compensation calculated using the treasury stock method.
Weighted average shares used in the computation of basic and diluted net income (loss) from continuing operations per share are as follows:
|
|
Three months ended |
|
|||||
(amounts in thousands) |
|
November 1, 2020 |
|
|
November 3, 2019 |
|
||
Weighted average common shares outstanding, basic |
|
|
|
|
|
|
|
|
Dilutive effect of stock-based compensation |
|
|
|
|
|
|
— |
|
Weighted average common shares outstanding, diluted |
|
|
|
|
|
|
|
|
During the second quarter of fiscal 2021,
During the second quarter of fiscal 2020,
I-19
per share of our common stock during the reporting period in relation to the price per share of our common stock as of the respective grant dates of our outstanding stock-based compensation awards.
|
|
Six months ended |
|
|||||
(amounts in thousands) |
|
November 1, 2020 |
|
|
November 3, 2019 |
|
||
Weighted average common shares outstanding, basic |
|
|
|
|
|
|
|
|
Dilutive effect of stock-based compensation |
|
|
— |
|
|
|
|
|
Weighted average common shares outstanding, diluted |
|
|
|
|
|
|
|
|
During the first half of fiscal 2021, we did not include a total of
During the first half of fiscal 2020,
14. Segment Information
Overall
Continuing Operations
Our continuing operations are classified into
Mattress Fabrics
The mattress fabrics segment manufactures, sources, and sells fabrics and mattress covers primarily to bedding manufacturers.
Upholstery Fabrics
The upholstery fabrics segment develops, manufactures, sources, and sells fabrics primarily to residential and commercial furniture manufacturers. Additionally, the segment includes Read, a wholly-owned subsidiary, which is a turn-key provider of window treatments and sourcing of upholstery fabrics and other products, as well as measuring and installation services of Read’s products for the hospitality and commercial industries. Read also supplies soft goods such as decorative top sheets, coverlets, duvet covers, bed skirts, bolsters, and pillows.
Discontinued Operation – Home Accessories Segment
As disclosed in Note 3 of the consolidated financial statements, we sold our entire ownership interest in eLuxury on March 31, 2020, and consequently our home accessories segment was eliminated at such time. Thus, the results of operations associated with our home accessories segment were excluded from our continuing operations and presented as a discontinued operation in our consolidated financial statements.
Our former home accessories segment was our finished products business that manufactured, sourced, and sold bedding accessories and home goods directly to consumers and businesses through global e-commerce, business-to-business, and other sales channels.
See Note 3 of the consolidated financial statements for detailed financial information of our former home accessories segment. As disclosed in Note 3, a reconciliation is provided that has detailed balance sheet information as of November 3, 2019, that is reconciled to captions titled “current assets – discontinued operation”, “noncurrent assets – discontinued operation”, current liabilities – discontinued operation”, and “noncurrent liabilities – discontinued operation” presented in the Consolidated Balance Sheet as of November 3, 2019. Also, a reconciliation is provided that pertains to detailed income statement information disclosed in Note 3 and is reconciled to net loss from discontinued operation presented in the Consolidated Statements of Net Income for the three-month and six-month periods ending November 3, 2019.
I-20
Financial Information
We evaluate the operating performance of our current business segments based upon income (loss) from continuing operations before certain unallocated corporate expenses, asset impairments, restructuring credit (expense) and restructuring related charges, and other non-recurring items. Cost of sales for each segment includes costs to develop, manufacture, or source our products, including costs such as raw material and finished goods purchases, direct and indirect labor, overhead, and incoming freight charges. Unallocated corporate expenses primarily represent compensation and benefits for certain executive officers and their staff, all costs associated with being a public company, and other miscellaneous expenses. Segment assets include assets used in the operations of each segment and primarily consist of accounts receivable, inventories, property, plant, and equipment, and right of use assets. The mattress fabrics segment also includes in segment assets its investment in an unconsolidated joint venture.
Statements of operations for our current operating segments are as follows:
|
|
Three months ended |
|
|||||
|
|
November 1, 2020 |
|
|
November 3, 2019 |
|
||
net sales by segment: |
|
|
|
|
|
|
|
|
mattress fabrics |
|
$ |
|
|
|
$ |
|
|
upholstery fabrics |
|
|
|
|
|
|
|
|
net sales |
|
$ |
|
|
|
$ |
|
|
gross profit from continuing operations by segment: |
|
|
|
|
|
|
|
|
mattress fabrics |
|
$ |
|
|
|
$ |
|
|
upholstery fabrics |
|
|
|
|
|
|
|
|
gross profit from continuing operations |
|
$ |
|
|
|
$ |
|
|
selling, general, and administrative expenses by segment: |
|
|
|
|
|
|
|
|
mattress fabrics |
|
$ |
|
|
|
$ |
|
|
upholstery fabrics |
|
|
|
|
|
|
|
|
unallocated corporate expenses |
|
|
|
|
|
|
|
|
selling, general, and administrative expenses |
|
$ |
|
|
|
$ |
|
|
income (loss) from continuing operations by segment: |
|
|
|
|
|
|
|
|
mattress fabrics |
|
$ |
|
|
|
$ |
|
|
upholstery fabrics |
|
|
|
|
|
|
|
|
unallocated corporate expenses |
|
|
( |
) |
|
|
( |
) |
total income from continuing operations |
|
|
|
|
|
|
|
|
interest expense |
|
|
— |
|
|
|
( |
) |
interest income |
|
|
|
|
|
|
|
|
other expense |
|
|
( |
) |
|
|
( |
) |
income before income taxes from continuing operations |
|
$ |
|
|
|
$ |
|
|
I-21
|
|
Six months ended |
|
|||||
|
|
November 1, 2020 |
|
|
November 3, 2019 |
|
||
net sales by segment: |
|
|
|
|
|
|
|
|
mattress fabrics |
|
$ |
|
|
|
$ |
|
|
upholstery fabrics |
|
|
|
|
|
|
|
|
net sales |
|
$ |
|
|
|
$ |
|
|
gross profit from continuing operations by segment: |
|
|
|
|
|
|
|
|
mattress fabrics |
|
$ |
|
|
|
$ |
|
|
upholstery fabrics |
|
|
|
|
|
|
|
|
gross profit from continuing operations |
|
$ |
|
|
|
$ |
|
|
selling, general, and administrative expenses by segment: |
|
|
|
|
|
|
|
|
mattress fabrics |
|
$ |
|
|
|
$ |
|
|
upholstery fabrics |
|
|
|
|
|
|
|
|
unallocated corporate expenses |
|
|
|
|
|
|
|
|
selling, general, and administrative expenses |
|
$ |
|
|
|
$ |
|
|
income (loss) from continuing operations by segment: |
|
|
|
|
|
|
|
|
mattress fabrics |
|
$ |
|
|
|
$ |
|
|
upholstery fabrics |
|
|
|
|
|
|
|
|
unallocated corporate expenses |
|
|
( |
) |
|
|
( |
) |
subtotal |
|
|
|
|
|
|
|
|
restructuring credit |
|
|
— |
|
|
|
|
|
total income from continuing operations |
|
|
|
|
|
|
|
|
interest expense |
|
|
( |
) |
|
|
( |
) |
interest income |
|
|
|
|
|
|
|
|
other expense |
|
|
( |
) |
|
|
( |
) |
income before income taxes from continuing operations |
|
$ |
|
|
|
$ |
|
|
Balance sheet information for our current operating segments follows:
(dollars in thousands) |
|
November 1, 2020 |
|
|
November 3, 2019 |
|
|
May 3, 2020 |
|
|||
Segment assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Mattress Fabrics |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Inventory |
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment (1) |
|
|
|
|
|
|
|
|
|
|
|
|
Right of use assets (2) |
|
|
|
|
|
|
|
|
|
|
|
|
Investment in unconsolidated joint venture |
|
|
|
|
|
|
|
|
|
|
|
|
Total mattress fabrics assets |
|
|
|
|
|
|
|
|
|
|
|
|
Upholstery Fabrics |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
|
|
|
|
|
|
|
|
|
|
Inventory |
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment (3) |
|
|
|
|
|
|
|
|
|
|
|
|
Right of use assets (4) |
|
|
|
|
|
|
|
|
|
|
|
|
Total upholstery fabrics assets |
|
|
|
|
|
|
|
|
|
|
|
|
Total segment assets |
|
|
|
|
|
|
|
|
|
|
|
|
Non-segment assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
Short-term investments - available for sale |
|
|
|
|
|
|
— |
|
|
|
|
|
Short-term investments - held-to-maturity |
|
|
|
|
|
|
— |
|
|
|
|
|
Current income taxes receivable |
|
|
— |
|
|
|
|
|
|
|
|
|
Current assets - discontinued operation |
|
|
— |
|
|
|
|
|
|
|
— |
|
Other current assets |
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment (5) |
|
|
|
|
|
|
|
|
|
|
|
|
Right of use assets (6) |
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill |
|
|
— |
|
|
|
|
|
|
|
— |
|
Intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
Long-term investments - rabbi trust |
|
|
|
|
|
|
|
|
|
|
|
|
Long-term investments - held-to-maturity |
|
|
|
|
|
|
— |
|
|
|
|
|
Noncurrent income taxes receivable |
|
|
— |
|
|
|
|
|
|
|
— |
|
Other assets |
|
|
|
|
|
|
|
|
|
|
|
|
Long-term note receivable affiliated with discontinued operation |
|
|
— |
|
|
|
|
|
|
|
— |
|
Noncurrent assets - discontinued operation |
|
|
— |
|
|
|
|
|
|
|
— |
|
Total assets |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
I-22
|
|
Six months ended |
|
|||||
(dollars in thousands) |
|
November 1, 2020 |
|
|
November 3, 2019 |
|
||
Capital expenditures (7): |
|
|
|
|
|
|
|
|
Mattress Fabrics |
|
$ |
|
|
|
$ |
|
|
Upholstery Fabrics |
|
|
|
|
|
|
|
|
Unallocated Corporate |
|
|
|
|
|
|
|
|
Discontinued Operation |
|
|
— |
|
|
|
|
|
Total capital expenditures |
|
$ |
|
|
|
$ |
|
|
Depreciation expense: |
|
|
|
|
|
|
|
|
Mattress Fabrics |
|
$ |
|
|
|
$ |
|
|
Upholstery Fabrics |
|
|
|
|
|
|
|
|
Discontinued Operation |
|
|
— |
|
|
|
|
|
Total depreciation expense |
|
$ |
|
|
|
$ |
|
|
(1) |
|
(2) |
|
(3) |
|
(4) |
|
(5) |
|
(6) |
|
(7) |
|
15. Income Taxes
Income Tax Expense
Total income tax expense (benefit) for the six-month periods ending November 1, 2020, and November 3, 2019, were allocated as follows:
|
|
November 1, |
|
|
November 3, |
|
||
(dollars in thousands) |
|
2020 |
|
|
2019 |
|
||
Income from continuing operations |
|
$ |
|
|
|
$ |
|
|
Loss from discontinued operations |
|
|
— |
|
|
|
( |
) |
Total income tax expense |
|
$ |
|
|
|
$ |
|
|
I-23
Effective Income Tax Rate
We recorded income tax expense of $
Our effective income tax rates associated with our continuing operations for the six-month periods ended November 1, 2020, and November 3, 2019, were based upon the estimated effective income tax rate applicable for the full year after giving effect to any significant items related specifically to interim periods. When calculating the annual estimated effective income tax rate for the six-months ended November 1, 2020, we were subject to a loss limitation rule in accordance with ASC Topic 740-270-30-36(a). This loss limitation rule required the taxable loss associated with our U.S. operations to be excluded from the annual estimated effective income tax rate calculation as it was determined that no tax benefit could be recognized resulting from the full valuation allowance against our U.S. income tax loss carryforward that is expected to originate during the current fiscal year. The effective income tax rate can be affected over the fiscal year by the mix and timing of actual earnings from our U.S. operations and foreign subsidiaries located in China and Canada versus annual projections, as well as changes in foreign currency exchange rates in relation to the U.S. dollar.
The following schedule summarizes the principal differences between income tax expense from continuing operations at the U.S. federal income tax rate and the effective income tax rate from continuing operations reflected in the consolidated financial statements for the six-month periods ending November 1, 2020 and November 3, 2019:
|
|
November 1, |
|
|
November 3, |
|
||
|
|
2020 |
|
|
2019 |
|
||
U.S. federal income tax rate |
|
|
|
% |
|
|
|
% |
U.S. valuation allowance |
|
|
|
|
|
— |
|
|
U.S. income tax law change |
|
|
( |
) |
|
|
— |
|
Global Intangible Low Taxed Income Tax ("GILTI") |
|
|
— |
|
|
|
|
|
Withholding taxes associated with foreign jurisdictions |
|
|
|
|
|
|
|
|
Foreign income tax rate differential |
|
|
|
|
|
|
|
|
Tax effects of foreign exchange rate (losses) gains |
|
|
( |
) |
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
|
% |
U.S. Tax Law Change
Effective July 20, 2020, the U.S Treasury Department finalized and enacted previously proposed regulations regarding the GILTI tax provisions of the TCJA. Prior to this enactment, GILTI represented a significant U.S. income tax on our foreign earnings during fiscal 2019 ($
As a result of the newly enacted regulations, we recorded a non-cash income tax benefit of $
Valuation Allowance
In accordance with ASC Topic 740, we evaluate our deferred income taxes to determine if a valuation allowance is required. ASC Topic 740 requires that companies assess whether a valuation allowance should be established based on the consideration of all available evidence using a “more-likely-than-not” standard, with significant weight being given to evidence that can be objectively verified. Since the company operates in multiple jurisdictions, we assess the need for a valuation allowance on a jurisdiction-by-jurisdiction basis, considering the effects of local tax law.
As a result of the U.S. tax law change relating to the GILTI tax provisions of the TCJA, we assessed the need for an additional valuation allowance against our U.S. net deferred income taxes, as GILTI represented a significant source of our U.S. taxable income during fiscal 2019 and 2020 that offset our U.S. pre-tax losses during such years, and which offset is now reversed as a result of the retroactivity of the new regulations. Consequently, due to the retroactivity of the new regulations, we experienced a recent history of cumulative U.S. taxable losses during our last two fiscal years and we currently expect our history of U.S. pre-tax losses to continue into fiscal 2021, as a result of the continuing economic uncertainty associated with the COVID-19 global pandemic. As a result of the significant weight of this negative evidence, we believe it is more-likely-than-not that our U.S. net
I-24
deferred income tax assets will not be fully realizable. Accordingly, we recorded a non-cash income tax charge of $
Additionally, we recorded a $
Based on our assessments as of November 1, 2020, November 1, 2019, and May 3, 2020, valuation allowances against our net deferred income taxes pertain to the following:
(dollars in thousands) |
|
November 1, 2020 |
|
|
November 3, 2019 |
|
|
May 3, 2020 |
|
|||
U.S. federal and state net deferred income tax assets |
|
$ |
|
|
|
|
|
|
|
|
|
|
U.S. capital loss carryforward |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
Undistributed Earnings
In accordance with ASC Topic 740, we assess whether the undistributed earnings from our foreign subsidiaries will be reinvested indefinitely or eventually distributed to our U.S. parent company. As of November 1, 2020, we assessed the liquidity requirements of our U.S. parent company and determined that our undistributed earnings from our foreign subsidiaries would not be reinvested indefinitely and would be eventually distributed to our U.S. parent company. The conclusion reached from our assessment has been consistent with prior years. ASC Topic 740 requires that a deferred income tax liability should be recorded for undistributed earnings from foreign subsidiaries that will not be reinvested indefinitely, and as a result we recorded a deferred income tax liability associated with undistributed earnings from our foreign subsidiaries. Also, we assess the recognition of U.S. foreign income tax credits associated with foreign withholding and income tax payments and whether it is more-likely-than-not that our foreign income tax credits will not be realized. If it is determined that any foreign income tax credits need to be recognized or it is more-likely-than-not our foreign income tax credits will not be realized, an adjustment to our provision for income taxes will be recognized at that time.
As a result of the TCJA, a U.S. corporation is allowed a
Uncertain Income Tax Positions
In accordance with ASC Topic 740, an unrecognized income tax benefit for an uncertain income tax position can be recognized in the first interim period during which the more-likely-than-not recognition threshold is met by the reporting period, or is effectively settled through examination, negotiation, or litigation, or the statute of limitations for the relevant taxing authority to examine and challenge the tax position has expired. If it is determined that any of the above conditions occur regarding our uncertain income tax positions, an adjustment to our unrecognized income tax benefits will be recorded at that time.
As of November 1, 2020, we had a $
As of November 1, 2020, we had a $
Our gross unrecognized income tax benefit of $
I-25
16. Stock-Based Compensation
Equity Incentive Plan Description
On September 16, 2015, our shareholders approved an equity incentive plan titled the Culp, Inc. 2015 Equity Incentive Plan (the “2015 Plan”). The 2015 Plan authorizes the grant of stock options intended to qualify as incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance units, and other equity and cash related awards as determined by our Compensation Committee. An aggregate of
As of November 1, 2020, there were
Performance-Based Restricted Stock Units
Senior Executives
We grant performance-based restricted stock units to certain senior executives which could earn up to a certain number of shares of common stock if certain performance targets are met over a three-fiscal year performance period as defined in the related restricted stock unit agreements. The number of shares of common stock that are earned based on the performance targets that have been achieved may be adjusted based on a market-based total shareholder return component as defined in the related restricted stock unit agreements.
Compensation cost for share-based awards is measured based on their fair market value on the date of grant. The fair market value per share was determined using the Monte Carlo simulation model for the market-based total shareholder return component and the closing price of our common stock for the performance-based component.
There were
The following table provides assumptions used to determine the fair market value of the market-based total shareholder return component using the Monte Carlo simulation model on our outstanding performance-based restricted units granted to certain senior executives on July 18, 2019 and August 2, 2018:
|
|
July 18, |
|
|
August 2, |
|
||
|
|
2019 |
|
|
2018 |
|
||
Closing price of our common stock |
|
$ |
|
|
|
$ |
|
|
Expected volatility of our common stock |
|
|
|
% |
|
|
|
% |
Expected volatility of peer companies (1) (2) |
|
29.9% - 82.3% |
|
|
|
|
% |
|
Risk-free interest rate |
|
|
|
% |
|
|
|
% |
Dividend yield |
|
|
|
% |
|
|
|
% |
Correlation coefficient of peer companies (1) (2) |
|
0.00 - 0.43 |
|
|
|
|
|
(1) |
|
(2) |
|
Key Employees and a Non-Employee
We grant performance-based restricted stock units which could earn up to a certain number of shares of common stock if certain performance targets are met over a three-fiscal year performance period as defined in the related restricted stock unit agreements.
Our performance-based restricted stock units granted to key employees were measured based on the fair market value (the closing price of our common stock) on the date of grant. No market-based total shareholder return component was included in these awards. Our performance-based restricted stock units granted to a non-employee, which vested during the first quarter of fiscal 2020, were measured based on the fair market value (closing price of our common stock) on the date when the performance criteria were met.
I-26
There were
Overall
The following table summarizes information related to our grants of performance-based restricted stock units associated with certain senior executives and key employees that are currently unvested as of November 1, 2020:
|
|
(3) |
|
|
(4) |
|
|
|
|
|
|
|
|
||
|
|
Performance-Based |
|
|
Restricted Stock |
|
|
|
|
|
|
|
|
||
|
|
Restricted Stock |
|
|
Units Expected |
|
|
|
|
|
|
|
|
||
Date of Grant |
|
Units Awarded |
|
|
to Vest |
|
|
Price Per Share |
|
|
|
Vesting Period |
|||
July 18, 2019 (1) |
|
|
|
|
|
|
|
|
|
$ |
|
|
(5) |
|
|
July 18, 2019 (2) |
|
|
|
|
|
|
|
|
|
$ |
|
|
(7) |
|
|
August 2, 2018 (1) |
|
|
|
|
|
|
|
|
|
$ |
|
|
(6) |
|
|
August 2, 2018 (2) |
|
|
|
|
|
|
|
|
|
$ |
|
|
(7) |
|
|
(1) |
|
(2) |
|
(3) |
|
(4) |
|
(5) |
|
(6) |
|
(7) |
|
The following table summarizes information related to our performance-based restricted stock units that vested during the six-month periods ending November 1, 2020 and November 3, 2019:
|
|
Performance-Based |
|
|
|
|
|
|
(4) |
||||
|
|
Restricted Stock |
|
|
(3) |
|
|
Price |
|||||
Fiscal Year |
|
Units Vested |
|
|
Fair Value |
|
|
Per Share |
|||||
Fiscal 2021 (1) |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
Fiscal 2021 (1) |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
Fiscal 2020 (1) |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
Fiscal 2020 (2) |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
(1) |
|
(2) |
|
(3) |
|
(4) |
|
We recorded compensation expense of $
I-27
assessment each reporting period to determine the probability of whether or not certain performance targets will be met as of the end of the vesting period. If certain performance goals are not expected to be achieved, compensation cost would not be recorded, and any previously recognized compensation cost would be reversed.
As of November 1, 2020, the remaining unrecognized compensation cost related to our performance-based restricted stock units was $
Time-Based Restricted Stock Units
The following table summarizes information related to our grants of time-based restricted stock unit awards associated with certain senior executives and key members of management that are unvested as of November 1, 2020:
|
|
Time-Based |
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock |
|
|
(1) |
|
|
|
|
||
Date of Grant |
|
Units Awarded |
|
|
Price Per Share |
|
Vesting Period |
||||
August 6, 2020 |
|
|
|
|
|
$ |
|
|
|
|
|
July 18, 2019 |
|
|
|
|
|
$ |
|
|
|
|
|
August 2, 2018 |
|
|
|
|
|
$ |
|
|
|
|
|
(1) |
Price per share represents closing price of common stock on the date the respective award was granted. |
Overall
We recorded compensation expense of $
As of November 1, 2020, the remaining unrecognized compensation cost related to our time-based restricted stock units was $
Common Stock Award
We granted a total of
We granted a total of
We recorded $
17. Leases
Overview
We lease manufacturing facilities, office space, distribution centers, and equipment under operating lease arrangements. We determine if an arrangement is a lease at its inception if it conveys the right to control the use of identified property, plant, or equipment for a period of time in exchange for consideration. Operating leases with an initial term of twelve months or less are not recognized in our Consolidated Balance Sheets. For leases of more than twelve months, we recognize a right of use asset and lease liability on the commencement date of a lease arrangement based on the present value of lease payments over the lease term.
Our operating leases have remaining lease terms of
I-28
options are not included in the lease terms for any of our leases, as there is not a significant economic incentive for us to exercise any of our renewal options.
Most of our leases do not provide an implicit interest rate, and as a result, we use our incremental borrowing rate, which approximates a collateralized rate, based on information available on the commencement date of a lease arrangement in determining the present value of lease our payments.
Balance Sheet
The right of use assets and lease liabilities associated with our operating leases as of November 1, 2020, November 3, 2019, and May 3, 2020, are as follows:
|
|
|
|
|
|
(1) |
|
|
|
|
|
|
(dollars in thousands) |
|
November 1, 2020 |
|
|
November 3, 2019 |
|
|
May 3, 2020 |
|
|||
Right of use assets |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Operating lease liability - current |
|
|
|
|
|
|
|
|
|
|
|
|
Operating lease liability – noncurrent |
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Supplemental Cash Flow Information
|
|
Six Months Ended |
|
|
Six Months Ended |
|
||
(dollars in thousands) |
|
November 1, 2020 |
|
|
November 3, 2019 |
|
||
Operating lease liability payments |
|
$ |
|
|
|
$ |
|
|
Right of use assets exchanged for lease liabilities |
|
|
|
|
|
|
|
|
Operating lease expense for the three-months ended November 1, 2020, and November 3, 2019, was $
Other Information
Maturity of our operating lease liabilities for the remainder of fiscal 2021, the subsequent next four fiscal years, and thereafter follows:
(dollars in thousands) |
|
|
|
|
2021 |
|
$ |
|
|
2022 |
|
|
|
|
2023 |
|
|
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
Thereafter |
|
|
— |
|
|
|
$ |
|
|
Less: interest |
|
|
( |
) |
Present value of lease liabilities |
|
$ |
|
|
As of November 1, 2020, the weighted average remaining lease term and discount rate for our operating leases follows:
|
|
November 1, 2020 |
|
|
Weighted average lease term |
|
|
|
|
Weighted average discount rate |
|
|
|
% |
I-29
As of November 3, 2019, the weighted average remaining lease term and discount rate for our operating leases follows:
|
|
November 3, 2019 |
|
|
Weighted average lease term |
|
|
|
|
Weighted average discount rate |
|
|
|
% |
18. Commitments and Contingencies
Litigation
The company is involved in legal proceedings and claims which have arisen in the ordinary course of business. Management has determined that it is not reasonably possible that these actions, when ultimately concluded and settled, will have a material adverse effect upon the financial position, results of operations, or cash flows of the company.
Accounts Payable – Capital Expenditures
As of November 1, 2020, November 3, 2019, and May 3, 2020, we had total amounts due regarding capital expenditures totaling $
Purchase Commitments – Capital Expenditures
As of November 1, 2020, we had open purchase commitments to acquire equipment for our mattress fabrics segment totaling $
19. Statutory Reserves
Our subsidiary located in China was required to transfer
The transfer to this reserve must be made before distributions of any dividend to shareholders. As of November 1, 2020, the company’s statutory surplus reserve was $
Our subsidiaries located in China can transfer funds to the parent company except for the statutory surplus reserve of $
20. Common Stock Repurchase Program
In March 2020, our board of directors approved an authorization for us to acquire up to $
As part of our comprehensive response to the COVID-19 pandemic, we announced on April 3, 2020, that our board of directors temporarily suspended the share repurchase program given the ongoing economic disruption and uncertainty. Accordingly, we did
As of November 1, 2020, we had $
I-30
21. Dividend Program
On December 3, 2020, we announced that our board of directors approved a quarterly cash dividend of $
During the six-months ended November 1, 2020, dividend payments totaled $
Our board of directors has sole authority to determine if and when we will declare future dividends and on what terms. Future dividend payments are subject to final determination by our board of directors and will depend on our earnings, capital requirements, financial condition, excess availability under our lines of credit, market and economic conditions, and other factors we consider relevant.
I-31
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
This report and the exhibits attached hereto contain “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 or alter 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 the company will realize these expectations, meet its guidance, or that these beliefs will prove correct.
Factors that could influence the matters discussed in such statements include the level of housing starts and sales of existing homes, consumer confidence, trends in disposable income, and general economic conditions. Decreases in these economic indicators could have a negative effect on our business and prospects. Likewise, increases in interest rates, particularly home mortgage rates, and increases in consumer debt or the general rate of inflation, could affect us adversely. The future performance of our business depends in part on our success in conducting and finalizing acquisition negotiations and integrating acquired businesses into our existing operations. Changes in consumer tastes or preferences toward products not produced by us could erode demand for our products. Changes in tariffs or trade policy, or changes in the value of the 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 the strengthening of currencies in Canada and China can have a negative impact on our sales of products produced in those places. Also, economic and 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 or valuation allowances 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, are included in Item 1A “Risk Factors” section 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.
I-32
ITEM 2. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
The following analysis of financial condition and results of operations should be read in conjunction with the Financial Statements and Notes and other exhibits included elsewhere in this report.
We sold our majority ownership interest in eLuxury, LLC (“eLuxury”) on March 31, 2020, resulting in the elimination of our home accessories segment at such time. Accordingly, the results of operations and assets and liabilities for this segment are excluded from the company’s continuing operations for the three-month and six-month periods ended November 3, 2019 and presented as a discontinued operation in this report. See Note 3 - Home Accessories Segment - Discontinued Operation, of the consolidated financial statements for further details.
General
Our fiscal year is the 52 or 53-week period ending on the Sunday closest to April 30. The six months ended November 1, 2020, and November 3, 2019, represent 26-week and 27-week periods, respectively.
Our continuing operations are classified into two business segments: mattress fabrics and upholstery fabrics. The mattress fabrics segment manufactures, sources, and sells fabrics and mattress covers primarily to bedding manufacturers. We have wholly owned mattress fabric operations located in Stokesdale, NC, High Point, NC, and Quebec, Canada, as well as a fifty-percent owned cut and sew mattress cover operation located in Haiti.
The upholstery fabrics segment develops, sources, manufactures, and sells fabrics primarily to residential and commercial furniture manufacturers. We have wholly owned upholstery fabric operations located in Shanghai, China, and Burlington, NC. Additionally, Read Window Products, LLC (“Read”), a wholly owned subsidiary located in Knoxville, TN, provides window treatments and sourcing of upholstery fabrics and other products, as well as measuring and installation services of Read’s products, to customers in the hospitality and commercial industries. Read also supplies soft goods such as decorative top sheets, coverlets, duvet covers, bed skirts, bolsters, and pillows.
We evaluate the operating performance of our current business segments based upon income (loss) from continuing operations before certain unallocated corporate expenses, asset impairments, restructuring credit (expense) and related charges, and other non-recurring items. Cost of sales in each segment includes costs to develop, manufacture, or source our products, including costs such as raw material costs and finished goods purchases, direct and indirect labor, overhead, and incoming freight charges. Unallocated corporate expenses primarily represent compensation and benefits for certain executive officers and their support staff, all costs associated with being a public company, and other miscellaneous expenses.
Executive Summary
Results of Continuing Operations
|
|
Three Months Ended |
|
|
|
|
|
|||||
(dollars in thousands) |
|
November 1, 2020 |
|
|
November 3, 2019 |
|
|
Change |
|
|||
Net sales |
|
$ |
76,851 |
|
|
$ |
69,550 |
|
|
10.5% |
|
|
Gross profit from continuing operations |
|
|
14,261 |
|
|
|
13,526 |
|
|
5.4% |
|
|
Gross profit margin from continuing operations |
|
|
18.6 |
% |
|
|
19.4 |
% |
|
(80)bp |
|
|
Selling, general, and administrative expenses |
|
|
9,743 |
|
|
|
9,117 |
|
|
6.9% |
|
|
Income from continuing operations |
|
|
4,518 |
|
|
|
4,409 |
|
|
2.5% |
|
|
Operating margin from continuing operations |
|
|
5.9 |
% |
|
|
6.3 |
% |
|
(40)bp |
|
|
Income before income taxes from continuing operations |
|
|
3,897 |
|
|
|
4,547 |
|
|
(14.3)% |
|
|
Income tax expense |
|
|
1,613 |
|
|
|
2,279 |
|
|
(29.2)% |
|
|
Net income from continuing operations |
|
|
2,384 |
|
|
|
2,252 |
|
|
5.9% |
|
|
|
Six Months Ended |
|
|
|
|
|
|||||
(dollars in thousands) |
|
November 1, 2020 |
|
|
November 3, 2019 |
|
|
Change |
|
|||
Net sales |
|
$ |
141,315 |
|
|
$ |
140,269 |
|
|
0.7% |
|
|
Gross profit from continuing operations |
|
|
24,162 |
|
|
|
25,938 |
|
|
(6.8)% |
|
|
Gross profit margin from continuing operations |
|
|
17.1 |
% |
|
|
18.5 |
% |
|
(140)bp |
|
|
Selling, general, and administrative expenses |
|
|
17,761 |
|
|
|
18,266 |
|
|
(2.8)% |
|
|
Income from continuing operations |
|
|
6,401 |
|
|
|
7,707 |
|
|
(16.9)% |
|
|
Operating margin from continuing operations |
|
|
4.5 |
% |
|
|
5.5 |
% |
|
(100)bp |
|
|
Income before income taxes from continuing operations |
|
|
5,421 |
|
|
|
8,010 |
|
|
(32.3)% |
|
|
Income tax expense |
|
|
5,937 |
|
|
|
3,971 |
|
|
49.5% |
|
|
Net (loss) income from continuing operations |
|
|
(349 |
) |
|
|
4,036 |
|
|
(108.6)% |
|
I-33
Net Sales
Overall, our net sales for the second quarter of fiscal 2021 increased by 10.5% compared with the same period a year ago, with mattress fabrics sales increasing 12.2% and upholstery fabrics sales increasing 8.7%. Our net sales for the first half of fiscal 2021 increased by 0.7% compared with the same period a year ago, with mattress fabrics sales increasing 2.2% and upholstery fabrics sales decreasing 0.9%. The first half of fiscal 2021 had 26 weeks compared to 27 weeks for the first half of fiscal 2020.
The increase in net sales for both our mattress and upholstery fabrics segments for the second quarter reflects a surge in demand driven by a greater consumer focus on the home environment. It also reflects our ability to service this increase in demand and respond quickly to meet the needs of our customers through our flexible global platform and the support of our long-term supplier relationships.
This increase in net sales for the second quarter reversed a decrease in net sales for both segments during the first quarter of fiscal 2021 that resulted from the economic disruption caused by the COVID-19 pandemic, especially in the beginning of the first quarter as customers and retail stores began to resume operations following pandemic-related shutdowns. The net result was an increase in mattress fabrics net sales and a decrease in upholstery fabrics net sales for the first half of fiscal 2021 compared with the prior-year period.
See the Segment Analysis section below for further details.
Income Before Income Taxes from Continuing Operations
Overall, our income before income taxes from continuing operations for the second quarter was $3.9 million, compared with $4.5 million for the prior-year period, while income before income taxes from continuing operations for the first six months of fiscal 2021 was $5.4 million, compared with $8.0 million for the prior year period.
Operating performance for the second quarter of fiscal 2021 was materially affected by unfavorable foreign exchange rate fluctuations associated with our operations in China. It was also pressured by an increase in SG&A expense primarily due to higher accrued incentive compensation expense, offset somewhat by reduced spending on travel and entertainment and marketing expenses, as compared with the same period a year ago. In addition to these factors, operating performance for the first half of fiscal 2020 was affected by the disruption form the COVID-19 pandemic during the first quarter, as well as significant inventory reductions and manufacturing inefficiencies associated with the dramatic ramp up in operations for our mattress fabrics segment during the first quarter.
See the Segment Analysis section below for further details.
Income Taxes
We recorded income tax expense of $5.9 million, or 109.5% of income before income tax expense from continuing operations for the six-month period ending November 1, 2020, compared with income tax expense of $4.0 million, or 49.6% of income before income tax expense from continuing operations for the prior year period. Income tax expense during the first half of fiscal 2021 included a $4.1 million net income tax charge, which consists of a $7.6 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-establishing of certain U.S. federal net operating loss carryforwards in connection with U.S. Treasury regulations enacted during the first quarter of fiscal 2021 regarding the Global Intangible Low Taxed Income (“GILTI”) tax provisions of the Tax Cuts and Jobs Act of 2017. Income tax expense during the first half of fiscal 2020 included $1.0 million of GILTI tax that did not recur in fiscal 2021 due to the recent change in the GILTI tax regulations as noted above. Additionally, our effective income tax rates for the first half of fiscal 2021 and fiscal 2020 were adversely affected by the continued shift in the mix of our taxable income that has been mostly earned by our foreign operations located in China and Canada, which have higher income tax rates than the U.S.
Refer to Note 15 of the consolidated financial statements for further details regarding our provision for income taxes from continuing operations.
Liquidity
As of November 1, 2020, our cash and cash equivalents, short-term investments (available for sale), and short-term and long-term investments (held-to-maturity) (collectively “cash and investments”) totaled $56.5 million compared with $77.1 million as of May 3, 2020.
I-34
The decrease in our cash and investments from the end of fiscal 2020 is attributable to repayment of all of the outstanding borrowings associated with our U.S. and China lines of credit and the loan we received under the Paycheck Protection Program of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) of 2020 (such loan, the “PPP loan”), which borrowings totaled $38.4 million. Excluding the repayments made on our lines of credit and the PPP loan, our cash and investments as of November 1, 2020, would have increased $17.8 million as compared to May 3, 2020. This increase was mostly due to (i) net cash provided by operating activities totaling $22.7 million, partially offset by (ii) cash payments of $2.6 million in the form of a regular quarterly dividend payment to shareholders; and (iii) $2.0 million of capital expenditures that were primarily related to our mattress fabrics segment.
Our net cash provided by operating activities was $22.7 million during the first half of fiscal 2021, compared with $8.2 million during the first half of fiscal 2020. This increase reflects a focused attention on working capital management. Additionally, our discontinued operation had net cash used in operating activities totaling $2.2 million and net cash used in investing activities totaling $32,000 during the first half of fiscal 2020. Our discontinued operation had net cash provided by financing activities, all of which were loan proceeds and capital contributions from the company and the former non-controlling interest holder of eLuxury, totaling $2.4 million during the first half of fiscal 2020. We believe our liquidity has improved in the absence of the former home accessories segment due to the significant losses incurred by that segment and the funding of its working capital requirements primarily by us through loans and capital contributions that are no longer required.
As of November 1, 2020, there were no outstanding borrowings under our lines of credit.
Dividend Program
On December 3, 2020, we announced that our board of directors approved a quarterly cash dividend of $0.11 per share, or $0.44 per share on an annualized basis. This payment will be made on January 18, 2021, to shareholders of record as of January 8, 2021.
During the six-month period ended November 1, 2020, dividend payments totaled $2.6 million, which represented quarterly dividend payments of $0.105 per share. During the six-month period ended November 3, 2019, dividend payments totaled $2.5 million, which represented quarterly dividend payments of $0.10 per share.
Our board of directors has sole authority to determine if and when we will declare future dividends and on what terms. Future dividend payments are subject to final determination by our board of directors and will depend on our earnings, capital requirements, financial condition, excess availability under our lines of credit, market and economic conditions, and other factors we consider relevant.
Common Stock Repurchase Program
In March 2020, our board of directors approved an authorization for us to acquire up to $5.0 million of our common stock. Under the common stock repurchase program, shares may be purchased from time to time in open market transactions, block trades, through plans established under the Securities Exchange Act Rule 10b5-1, or otherwise. The number of shares purchased, and the timing of such purchases will be based on working capital requirements, market and general business conditions, and other factors, including alternative investment opportunities.
As part of our comprehensive response to the COVID-19 global pandemic, we announced on April 3, 2020, that our board of directors temporarily suspended the share repurchase program given the ongoing economic disruption and uncertainty. Accordingly, we did not purchase any shares of our common stock through the end of our second quarter of fiscal 2021. Additionally, we did not purchase any share of our common stock during the six-month period ended November 3, 2019.
As of November 1, 2020, we had $5.0 million available for repurchases of our common stock.
I-35
Segment Analysis
Mattress Fabrics Segment
|
|
Three Months Ended |
|
|
|
|
|
|||||
(dollars in thousands) |
|
November 1, 2020 |
|
|
November 3, 2019 |
|
|
Change |
|
|||
Net sales |
|
$ |
40,030 |
|
|
$ |
35,666 |
|
|
12.2% |
|
|
Gross profit from continuing operations |
|
|
7,584 |
|
|
|
6,247 |
|
|
21.4% |
|
|
Gross profit margin from continuing operations |
|
|
18.9 |
% |
|
|
17.5 |
% |
|
140bp |
|
|
Selling, general, and administrative expenses |
|
|
3,202 |
|
|
|
2,953 |
|
|
8.4% |
|
|
Income from continuing operations |
|
|
4,382 |
|
|
|
3,294 |
|
|
33.0% |
|
|
Operating margin from continuing operations |
|
|
10.9 |
% |
|
|
9.2 |
% |
|
170bp |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
|||||
(dollars in thousands) |
|
November 1, 2020 |
|
|
November 3, 2019 |
|
|
Change |
|
|||
Net sales |
|
$ |
76,133 |
|
|
$ |
74,525 |
|
|
2.2% |
|
|
Gross profit from continuing operations |
|
|
12,191 |
|
|
|
11,938 |
|
|
2.1% |
|
|
Gross profit margin from continuing operations |
|
|
16.0 |
% |
|
|
16.0 |
% |
|
0bp |
|
|
Selling, general, and administrative expenses |
|
|
5,964 |
|
|
|
6,025 |
|
|
(1.0)% |
|
|
Income from continuing operations |
|
|
6,227 |
|
|
|
5,913 |
|
|
5.3% |
|
|
Operating margin from continuing operations |
|
|
8.2 |
% |
|
|
7.9 |
% |
|
30bp |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
The increase in mattress fabrics net sales for the second quarter of fiscal 2021 reflects an increase in demand driven by greater consumer awareness and appreciation for overall comfort and wellness within the home environment as a result of the COVID-19 pandemic. This has led to an increase in discretionary spending on home furnishing products, including mattresses.
During the quarter, we built on the sales momentum generated during the last eight weeks of the first quarter by utilizing our product-driven strategy for both mattress fabrics and sewn covers, as well as our global supply chain and dedicated attention to our customers. Our global manufacturing and sourcing operations in the U.S., Canada, Haiti, Asia, and Turkey have enabled us to support current demand and serve the needs of our customers.
Our sewn mattress cover business also experienced continued growth, with demand trends exceeding pre-COVID levels. This trend reflects the ongoing growth in the boxed bedding space, and we continue to work collaboratively with both new and existing customers to develop fresh, innovative products. Our efficient global platform, along with our ability to maximize our fully vertical supply chain with product offerings from fabrics to sewn covers, allows us to support the rapidly changing demands of our customers. Additionally, our building expansion in Haiti was completed during the second quarter, providing additional capacity and enhancing our ability to produce sewn covers.
The increase in net sales for the second quarter reversed a decrease in net sales during the first quarter of fiscal 2021 that resulted from the economic disruption caused by the COVID-19 pandemic, especially in the beginning of the first quarter as customers and retail stores began to resume operations following pandemic-related shutdowns. The net result was an increase in mattress fabrics net sales for the first half of fiscal 2021 compared with the prior-year period. The first half of fiscal 2021 was a 26-week period, compared with a 27-week period for the first half of fiscal 2020.
During this uncertain environment, we have managed our business with a firm focus on creative designs, innovative fabric and sewn cover products, and customer service. These efforts are supported by our ongoing developments in product innovation, including expanding our specialty finish options and leveraging our virtual 3D image rendering services for design collaboration opportunities. We expect that our increased capacity in North America resulting from our $4.0 million investment in additional knit machines will be available during the fourth quarter of fiscal 2021. We also believe that the domestic mattress industry, and, in turn, our business, will benefit from the recent preliminary anti-dumping duties imposed by the U.S. Department of Commerce on mattress imports from seven countries for engaging in unfair trade practices relating to low-priced mattress imports.
Despite positive sales trends during the second quarter and first six months of fiscal 2021, our customers’ ability to meet their demand is being challenged by supply chain constraints related primarily to non-fabric components, as well as labor shortages, which could temporarily delay their scheduled delivery of orders for mattress fabrics and sewn mattress covers during the second half of fiscal 2021. Additionally, the ongoing impact and duration of the COVID-19 pandemic remains unknown and depends on factors beyond our knowledge or control, including the duration and severity of the outbreak, actions taken to contain its spread and mitigate the public health and economic effects, the short- and long-term disruption of the global economy, consumer confidence, unemployment, employee health, and the financial health of our customers, suppliers, and distribution channels. At
I-36
this time, we cannot reasonably estimate the ongoing impact of the COVID-19 pandemic on our mattress fabrics segment; however, if conditions relating to the pandemic worsen, the disruption could adversely affect our operations and financial performance.
Gross Profit, Selling, General & Administrative Expenses, and Operating Income
The increase in mattress fabrics profitability during the second quarter and first six months of fiscal 2021 was primarily due to the benefits of fixed cost absorption from higher sales and improved operating efficiencies resulting from fully maximizing our production capacity.
Segment assets
Segment assets consist of accounts receivable, inventory, property, plant, and equipment, right of use assets, and investment in unconsolidated joint venture.
(dollars in thousands) |
|
November 1, 2020 |
|
|
November 3, 2019 |
|
|
May 3, 2020 |
|
|||
Accounts receivable |
|
$ |
15,914 |
|
|
$ |
11,224 |
|
|
$ |
12,212 |
|
Inventory |
|
|
24,200 |
|
|
|
27,751 |
|
|
|
26,620 |
|
Property, plant & equipment |
|
|
38,818 |
|
|
|
42,899 |
|
|
|
40,682 |
|
Right of use assets |
|
|
1,186 |
|
|
|
170 |
|
|
|
362 |
|
Investment in unconsolidated joint venture |
|
|
1,859 |
|
|
|
1,504 |
|
|
|
1,602 |
|
|
|
$ |
81,977 |
|
|
$ |
83,548 |
|
|
$ |
81,478 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Refer to Note 14 of the consolidated financial statements for disclosures regarding determination of our segment assets.
Accounts Receivable
As of November 1, 2020, accounts receivable increased by $4.7 million, or 41.8%, compared with November 3, 2019. This increase reflects the increase in net sales during the second quarter of fiscal 2021 compared with the prior-year period. Net sales during the second quarter of fiscal 2021 were $40.0 million compared with $35.7 million during the second quarter of fiscal 2020. Additionally, this increase reflects slower cash collections on accounts receivable during the second quarter of fiscal 2021 compared with the second quarter of fiscal 2020 stemming from current economic conditions associated with the COVID-19 pandemic that were not present during the second quarter of fiscal 2020.
As of November 1, 2020, accounts receivable increased by $3.7 million, or 30.3%, compared with May 3, 2020. This increase reflects the substantial increase in net sales during the second quarter of fiscal 2021 compared with the fourth quarter of fiscal 2020. Net sales during the second quarter of fiscal 2021 were $40.0 million, an increase of $16.6 million, or 71%, compared with net sales of $23.4 million during the fourth quarter of fiscal 2020. Although we experienced a substantial increase in net sales during the second quarter of fiscal 2021, the increase in our accounts receivable also reflects faster cash collections during the second quarter of fiscal 2021 as compared with the fourth quarter of fiscal 2020. The faster cash collections stem from our customers’ return to making payments based on normal credit terms as opposed to the extended terms granted during the fourth quarter of fiscal 2020 in response to the COVID-19 pandemic.
Days’ sales outstanding was 36 days for the second quarter of fiscal 2021, as compared with 29 days for the second quarter of fiscal 2020 and 48 days for the fourth quarter of fiscal 2020.
Inventory
As of November 1, 2020, inventory decreased by $3.6 million, or 12.8%, compared with November 3, 2019. Additionally, as of November 1, 2020, inventory decreased by $2.4 million, or 9.1%, compared with May 3, 2020. Although our net sales increased during the second quarter of fiscal 2021 compared with the second quarter and fourth quarter of fiscal 2020, our trends in inventory reflect improved inventory management by better aligning our inventory purchases to reflect current demand trends.
Property, Plant, & Equipment
The $38.8 million as of November 1, 2020, represents property, plant, and equipment of $26.5 million and $12.3 million located in the U.S. and Canada, respectively. The $42.9 million as of November 3, 2019, represents property, plant, and equipment of $30.5 million and $12.4 million located in the U.S. and Canada, respectively. The $40.7 million as of May 3, 2020, represents property, plant, and equipment located of $27.7 million and $13.0 million located in the U.S. and Canada, respectively.
I-37
As of November 1, 2020, property, plant, and equipment decreased as compared with November 3, 2019, and May 3, 2020. This trend represents a decrease in capital expenditures resulting from prior cost cutting measures as part of our comprehensive response to COVID-19.
During the second half of fiscal 2021, we plan to invest $4 million in additional knit machines to expand our capacity in North America to support our future growth plan.
Right of Use Assets
The $1.2 million as of November 1, 2020, represents right of use assets of $696,000 and $490,000 located in the U.S. and Canada, respectively. The $170,000 as of November 3, 2019, and the $362,000 as of May 3, 2020, represent right of use assets located in the U.S.
As of November 1, 2020, right of use assets increased as compared with November 3, 2019, and May 3, 2020. This increase reflects the addition of a new warehouse lease agreement associated with our operation located in Canada that was entered into during the first quarter of fiscal 2021. This lease agreement has a three-year term and is set to expire during fiscal 2023. The amount of the change associated with our right of use assets between reporting periods is based on the length of the lease term remaining on our leases prior to their expiration or option to renew in relation to the reporting periods presented.
Investment in Unconsolidated Joint Venture
Our investment in unconsolidated joint venture represents our fifty percent ownership of Class International Holdings Ltd. (See Note 8 to the consolidated financial statements for further details).
Upholstery Fabrics Segment
Net Sales
|
|
Three Months Ended |
|
|
|
|
|
|||||||||||||
(dollars in thousands) |
|
November 1, 2020 |
|
|
|
|
|
|
November 3, 2019 |
|
|
|
|
|
|
% Change |
|
|||
Non-U.S. Produced |
|
$ |
34,473 |
|
|
|
94 |
% |
|
$ |
30,805 |
|
|
|
91 |
% |
|
|
11.9 |
% |
U.S. Produced |
|
|
2,348 |
|
|
|
6 |
% |
|
|
3,079 |
|
|
|
9 |
% |
|
|
(23.7 |
)% |
Total |
|
$ |
36,821 |
|
|
|
100 |
% |
|
$ |
33,884 |
|
|
|
100 |
% |
|
|
8.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
|||||||||||||
(dollars in thousands) |
|
November 1, 2020 |
|
|
|
|
|
|
November 3, 2019 |
|
|
|
|
|
|
% Change |
|
|||
Non-U.S. Produced |
|
$ |
60,484 |
|
|
|
93 |
% |
|
$ |
60,434 |
|
|
|
92 |
% |
|
|
0.1 |
% |
U.S. Produced |
|
|
4,698 |
|
|
|
7 |
% |
|
|
5,310 |
|
|
|
8 |
% |
|
|
(11.5 |
)% |
Total |
|
$ |
65,182 |
|
|
|
100 |
% |
|
$ |
65,744 |
|
|
|
100 |
% |
|
|
(0.9 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The increase in upholstery fabrics net sales during the second quarter of fiscal 2021 reflects a significant increase in sales for our residential upholstery business, which was driven primarily by the increased consumer focus on the at-home experience and overall comfort. Through our platform in Asia, including our expanded cut and sew capabilities in Vietnam and our long-term supplier relationships, we were able to respond quickly to meet this upsurge in demand.
Our line of highly durable, stain-resistant LiveSmart® performance fabrics, as well as our line of LiveSmart Evolve® performance plus sustainability fabrics, continued to experience favorable demand trends during the second quarter. We also recently launched LiveSmart Ultra™, which features a new antimicrobial finish as the next step in our LiveSmart performance brand evolution. These Livesmart performance fabrics are important drivers of our residential growth.
Our hospitality business remained under pressure by the ongoing COVID-19 disruption that continued to affect the travel and leisure industries. These lingering pressures also affected Read Window Products, our window treatment and installation business, during the quarter. While sales for our hospitality business remained relatively stable as compared to the first quarter, we expect that the disruption in hospitality and leisure will continue to affect this business in the near term, as it remains uncertain whether hotels and other hospitality venues will undertake new refurnishing projects in the current environment.
The increase in upholstery fabrics net sales for the second quarter reversed a decrease in net sales during the first quarter of fiscal 2021 that resulted from the economic disruption caused by the COVID-19 pandemic, especially in the beginning of the first quarter as customers and retail stores began to resume operations following pandemic-related shutdowns. The net result was a decrease in upholstery fabrics net sales for the first half of fiscal 2021 compared with the prior-year period. The first half of fiscal 2021 was a 26-week period, compared with a 27-week period for the first half of fiscal 2020.
I-38
Looking ahead, we are encouraged by the strong backlog in our residential upholstery business and our ability to meet this demand. However, despite these positive trends, our customers’ ability to meet their demand is being challenged by supply chain constraints related primarily to non-fabric components, as well as labor shortages, which could temporarily delay their scheduled delivery of orders for upholstery fabrics during the second half of fiscal 2021. Additionally, the ongoing economic and health effects of the COVID-19 pandemic, as well as the duration of such effects, remain unknown and depend on factors beyond our knowledge or control. At this time, we cannot reasonably estimate the ongoing impact of the pandemic on our upholstery fabrics segment; however, if conditions worsen, the impact on our employees, suppliers, consumers, and the global economy could adversely affect our operations and financial performance.
Gross Profit, Selling, General & Administrative Expenses, and Operating Income
|
|
Three Months Ended |
|
|
|
|
|
|||||
(dollars in thousands) |
|
November 1, 2020 |
|
|
November 3, 2019 |
|
|
Change |
|
|||
Gross profit from continuing operations |
|
|
6,677 |
|
|
|
7,279 |
|
|
(8.3)% |
|
|
Gross profit margin from continuing operations |
|
|
18.1 |
% |
|
|
21.5 |
% |
|
(340)bp |
|
|
Selling, general, and administrative expenses |
|
|
3,390 |
|
|
|
3,806 |
|
|
(10.9)% |
|
|
Income from continuing operations |
|
|
3,287 |
|
|
|
3,473 |
|
|
(5.4)% |
|
|
Operating margin from continuing operations |
|
|
8.9 |
% |
|
|
10.2 |
% |
|
(130)bp |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
|||||
(dollars in thousands) |
|
November 1, 2020 |
|
|
November 3, 2019 |
|
|
Change |
|
|||
Gross profit from continuing operations |
|
|
11,971 |
|
|
|
14,000 |
|
|
(14.5)% |
|
|
Gross profit margin from continuing operations |
|
|
18.4 |
% |
|
|
21.3 |
% |
|
(290)bp |
|
|
Selling, general, and administrative expenses |
|
|
6,570 |
|
|
|
7,652 |
|
|
(14.1)% |
|
|
Income from continuing operations |
|
|
5,401 |
|
|
|
6,348 |
|
|
(14.9)% |
|
|
Operating margin from continuing operations |
|
|
8.3 |
% |
|
|
9.7 |
% |
|
(140)bp |
|
|
Restructuring credit |
|
|
— |
|
|
|
35 |
|
|
(100.0)% |
|
The decrease in upholstery fabrics profitability for the second quarter was primarily due to unfavorable China foreign exchange rate fluctuations, as well as some impact from sales mix, partially offset by lower spending on travel and entertainment and marketing expenses. The decrease in upholstery fabrics profitability for the first half of fiscal 2021 was also due to these factors, along with a decrease in sales during the first quarter of fiscal 2021.
Looking ahead, we expect that unfavorable foreign exchange rate fluctuations associated with our operations in China, as well as some impact from sales mix due to the ongoing pressures on our hospitality business, will adversely affect our profitability at least through the third quarter of fiscal 2021.
Segment Assets
Segment assets consist of accounts receivable, inventory, property, plant, and equipment, and right of use assets.
(dollars in thousands) |
|
November 1, 2020 |
|
|
November 3, 2019 |
|
|
May 3, 2020 |
|
|||
Accounts receivable |
|
$ |
17,046 |
|
|
$ |
12,666 |
|
|
$ |
12,881 |
|
Inventory |
|
|
23,526 |
|
|
|
23,692 |
|
|
|
21,287 |
|
Property, plant & equipment |
|
|
2,014 |
|
|
|
1,774 |
|
|
|
1,633 |
|
Right of use assets |
|
|
3,269 |
|
|
|
2,610 |
|
|
|
1,633 |
|
|
|
$ |
45,855 |
|
|
$ |
40,742 |
|
|
$ |
37,434 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Refer to Note 14 of the consolidated financial statements for disclosures regarding determination of our segment assets.
I-39
Accounts Receivable
As of November 1, 2020, accounts receivable increased by $4.4 million, or 34.6%, compared with November 3, 2019. This increase primarily reflects the increase in net sales during the second quarter of fiscal 2021 compared with the prior-year period. Net sales during the second quarter of fiscal 2021 were $36.8 million compared with $33.9 million during the second quarter of fiscal 2020. Additionally, this increase reflects slower cash collections on accounts receivable during the second quarter of fiscal 2021 compared with the second quarter of fiscal 2020 stemming from current economic conditions associated with the COVID-19 pandemic that were not present during the second quarter of fiscal 2020.
As of November 1, 2020, accounts receivable increased by $4.2 million, or 32.3%, compared with May 3, 2020. This increase reflects the substantial increase in net sales during the second quarter of fiscal 2021 compared with the fourth quarter of fiscal 2020. Net sales during the second quarter of fiscal 2021 were $36.8 million, an increase of $12.8 million, or 53%, compared with net sales of $24.0 million during the fourth quarter of fiscal 2020. Although we experienced a substantial increase in net sales during the second quarter of fiscal 2021, the increase in our accounts receivable also reflects faster cash collections during the second quarter of fiscal 2021 as compared with the fourth quarter of fiscal 2021. The faster cash collections stem from our customers’ return to making payments based on normal credit terms as opposed to the extended terms granted during the fourth quarter of fiscal 2020 in response to the COVID-19 pandemic.
Days’ sales outstanding was 41 days during the second quarter of fiscal 2021, as compared with 33 days during the second quarter of fiscal 2020 and 47 days during the fourth quarter of fiscal 2020.
Inventory
As of November 1, 2020, inventory totaling $23.5 million was comparable with inventory totaling $23.7 million as of November 3, 2019. Additionally, as of November 1, 2020, inventory totaling $23.5 million was comparable with inventory totaling $21.3 million as of May 3, 2020. Although our net sales increased during the second quarter of fiscal 2021 compared with the second quarter and fourth quarter of fiscal 2020, our inventory levels remained consistent for the reporting periods presented, which reflects improved inventory management by better aligning our inventory purchases to reflect current demand trends.
Property, Plant, & Equipment
The $2.0 million as of November 1, 2020, represents property, plant, and equipment of $1.1 million and $904,000 located in the U.S. and China, respectively. The $1.8 million as of November 3, 2019, represents property, plant, and equipment of $1.3 million and $500,000 located in the U.S. and China, respectively. The $1.6 million as of May 3, 2020, represents property, plant, and equipment of $1.2 million and $471,000 located in the U.S. and China, respectively.
Right of Use Assets
The $3.3 million as of November 1, 2020, represents right of use assets of $2.7 million and $561,000 located in China and the U.S., respectively. The $2.6 million as of November 3, 2019, represents right of use assets of $1.5 million and $1.1 million located in China and the U.S., respectively. The $1.6 million as of May 3, 2020, represents right of use assets of $857,000 and $776,000 located in the U.S. and China, respectively.
As of November 1, 2020, right of use assets increased by $1.7 million, or 106.3%, compared with May 3, 2020. This increase primarily reflects the renewal of certain lease agreements that extended the lease terms for two buildings associated with our operations located in China during the first quarter of fiscal 2021. The amount of the change associated with our right of use assets between reporting periods is based on the length of the lease term remaining on our leases prior to their expiration or option to renew in relation to the reporting periods presented.
Discontinued Operation - Home Accessories Segment
As previously disclosed, we sold our majority ownership interest in eLuxury, LLC (“eLuxury”) during the fourth quarter of fiscal 2020, resulting in the elimination of our home accessories segment at such time. Accordingly, there are no results of operations and assets and liabilities for the home accessories segment in the company’s continuing operations for fiscal 2021, and the financial results for this segment are excluded from the company’s continuing operations for the three-month and six-month periods ended November 3, 2019 and have been reclassified and presented as a discontinued operation in our consolidated financial statements. See Note 3 - Home Accessories Segment - Discontinued Operation, of the consolidated financial statements for further details, and see also the section titled “Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION – 2020 compared with 2019 – Segment Analysis - Discontinued Operation – Home Accessories Segment” in our Form 10-K filed with the Securities and Exchange Commission on July 17, 2020, for the fiscal year ended May 3, 2020, for additional information.
I-40
Other Income Statement Categories
|
|
Three Months Ended |
|
|
|
|
|
|||||
(dollars in thousands) |
|
November 1, 2020 |
|
|
November 3, 2019 |
|
|
% Change |
|
|||
SG&A expenses |
|
$ |
9,743 |
|
|
$ |
9,117 |
|
|
|
6.9 |
% |
Interest expense |
|
|
— |
|
|
|
21 |
|
|
|
(100.0 |
)% |
Interest income |
|
|
59 |
|
|
|
258 |
|
|
|
(77.1 |
)% |
Other expense |
|
|
680 |
|
|
|
99 |
|
|
|
586.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
|||||
(dollars in thousands) |
|
November 1, 2020 |
|
|
November 3, 2019 |
|
|
% Change |
|
|||
SG&A expenses |
|
$ |
17,761 |
|
|
$ |
18,266 |
|
|
|
(2.8 |
)% |
Interest expense |
|
|
51 |
|
|
|
21 |
|
|
|
142.9 |
% |
Interest income |
|
|
117 |
|
|
|
518 |
|
|
|
(77.4 |
)% |
Other expense |
|
|
1,046 |
|
|
|
194 |
|
|
|
439.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, General, and Administrative Expenses
The increase in selling, general, and administrative expenses during the second quarter of fiscal 2021 compared with the second quarter of fiscal 2020 is mostly due to higher incentive compensation expense reflecting stronger financial results in relation to pre-established performance targets, partially offset by significant cost cutting measures associated with discretionary spending such as professional fees, travel and entertainment expenses, and certain marketing expenses.
The decrease in selling, general, and administrative expenses during the first half of fiscal 2021 compared with the first half of fiscal 2020 is mostly due to our significant cost cutting measures during the fourth quarter of fiscal 2020 that continued into the first quarter of fiscal 2021 as part of our comprehensive response to the COVID-19 global pandemic. These significant cost cutting measures primarily related to compensation and included (i) implementing temporary salary reductions, (ii) making workforce adjustments to align with demand, (iii) suspending merit pay increases, and (iv) aggressive reduction in discretionary spending such as professional fees, travel and entertainment expenses, and certain marketing expenses. The decrease in selling, general, and administrative expense as a result of these cost cutting measures was partially offset by higher incentive compensation expense reflecting stronger financial results in relation to pre-established performance targets that were primarily incurred during the second quarter of fiscal 2021.
Interest Expense
During the six-month period ending November 1, 2020, our interest expense is attributable to interest paid on amounts borrowed during the fourth quarter of fiscal 2020 in connection with the economic uncertainty associated with the COVID-19 global pandemic. As a result of the economic uncertainty relating to the duration of the pandemic and its overall effect on our business, we proactively borrowed $30.8 million under our lines of credit and applied for and received a $7.6 million loan under the SBA’s Paycheck Protection Program. During the first quarter of fiscal 2021, we repaid in full the PPP loan and all the borrowings that were outstanding under our lines of credit as of May 3, 2020. Additionally, we did not incur any interest expense during the three-month period ending November 1, 2020, as there were no borrowings outstanding under our line of credit agreements during such time.
The interest expense incurred during the three-month and six-month periods ending November 3, 2019, reflect our historically low amount of borrowings outstanding.
Interest Income
Interest income reflects interest earned on our current investments of excess cash held in money market funds, short-term bond funds, and investment-grade U.S. corporate, foreign, and government bonds, as well as interest earned on money market and mutual fund investments associated with our rabbi trust that funds our deferred compensation plan. The decrease in interest income during fiscal 2021 compared with fiscal 2020 is due mostly to a decrease in interest rates associated with these investments.
I-41
Other Expense
The increase in other expense during fiscal 2021 compared with fiscal 2020 was due mostly to less favorable foreign currency exchange rates applied against our balance sheet accounts denominated in Chinese Renminbi to determine the corresponding U.S dollar financial reporting amount. During the first half of fiscal 2021, we reported a foreign exchange rate loss of $689,000 compared with a foreign exchange rate gain of $150,000 during the first half of fiscal 2020. However, the $689,000 foreign exchange rate loss that was incurred during the first half of fiscal 2021 was mostly offset by an income tax benefit totaling $650,000 that was associated with deductible foreign exchange rate losses as our China operations pay income taxes in their local currency (see Income Taxes – Effective Income Tax Rate section below for further details).
Income Taxes
Effective Income Tax Rate
We recorded income tax expense of $5.9 million, or 109.5% of income before income taxes from continuing operations, for the six-month period ended November 1, 2020, compared with income tax expense of $4.0 million, or 49.6% of income before income taxes from continuing operations, for the six-month period ended November 3, 2019.
Our effective income tax rates associated with our continuing operations for the six-month periods ended November 1, 2020, and November 3, 2019, were based upon the estimated effective income tax rate applicable for the full year after giving effect to any significant items related specifically to interim periods. When calculating the annual estimated effective income tax rate for the six months ended November 1, 2020, we were subject to a loss limitation rule in accordance with ASC Topic 740-270-30-36(a). This loss limitation rule required the taxable loss associated with our U.S. operations to be excluded from the annual estimated effective income tax rate calculation as it was determined that no tax benefit could be recognized resulting from the full valuation allowance against our U.S income tax loss carryforward that is expected to originate during the current fiscal year. The effective income tax rate can be affected over the fiscal year by the mix and timing of actual earnings from our U.S. operations and foreign subsidiaries located in China and Canada versus annual projections, as well as changes in foreign currency exchange rates in relation to the U.S. dollar.
The following schedule summarizes the principal differences between income tax expense from continuing operations at the U.S. federal income tax rate and the effective income tax rate from continuing operations reflected in the consolidated financial statements for the six-month periods ending November 1, 2020 and November 3, 2019:
|
|
Six Months Ended |
|
|||||
|
|
November 1, 2020 |
|
|
November 3, 2019 |
|
||
U.S. federal income tax rate |
|
|
21.0 |
% |
|
|
21.0 |
% |
U.S. valuation allowance |
|
|
141.6 |
|
|
|
— |
|
U.S. income tax law change |
|
|
(65.1 |
) |
|
|
— |
|
Global Intangible Low Taxed Income Tax ("GILTI") |
|
|
— |
|
|
|
12.7 |
|
Withholding taxes associated with foreign jurisdictions |
|
|
8.4 |
|
|
|
6.1 |
|
Foreign income tax rate differential |
|
|
6.6 |
|
|
|
3.5 |
|
Tax effects of foreign exchange rate (losses) gains |
|
|
(4.0 |
) |
|
|
2.3 |
|
Other |
|
|
1.0 |
|
|
|
4.0 |
|
|
|
|
109.5 |
% |
|
|
49.6 |
% |
U.S. Tax Law Change
Effective July 20, 2020, the U.S Treasury Department finalized and enacted previously proposed regulations regarding the GILTI tax provisions of the Tax Cuts and Jobs Act of 2017 (“TCJA”). Prior to this enactment, GILTI represented a significant U.S. income tax on our foreign earnings during fiscal 2019 ($2.1 million) and fiscal 2020 ($1.9 million). With the enactment of these final regulations, we are now eligible for an exclusion from GILTI since we meet the provisions for the GILTI High-Tax exception included in the final regulations. In addition, the enactment of the new regulations and our eligibility for the GILTI High-Tax exception are retroactive to the original enactment of the GILTI tax provision, which includes our 2019 and 2020 fiscal years.
As a result of the newly enacted regulations, we recorded a non-cash income tax benefit of $3.5 million resulting from the re-establishment of certain U.S. federal net operating loss carryforwards. This $3.5 million income tax benefit was recorded as a discrete event in which its full income tax effects were recorded in the first quarter and six-month year-to-date period of fiscal 2021.
Valuation Allowance
In accordance with ASC Topic 740, we evaluate our deferred income taxes to determine if a valuation allowance is required. ASC Topic 740 requires that companies assess whether a valuation allowance should be established based on the consideration
I-42
of all available evidence using a “more-likely-than-not” standard, with significant weight being given to evidence that can be objectively verified. Since the company operates in multiple jurisdictions, we assess the need for a valuation allowance on a jurisdiction-by-jurisdiction basis, considering the effects of local tax law.
As a result of the U.S. tax law change relating to the GILTI tax provisions of the TCJA, we assessed the need for an additional valuation allowance against our U.S. net deferred income taxes, as GILTI represented a significant source of our U.S. taxable income during fiscal 2019 and fiscal 2020 that offset our U.S. pre-tax losses during such years, and which offset is now reversed as a result of the retroactivity of the new regulations. Consequently, due to the retroactivity of the new regulations, we experienced a recent history of cumulative U.S. taxable losses during our last two fiscal years, and we currently expect our history of U.S. pre-tax losses to continue into fiscal 2021 as a result of the continuing economic uncertainty associated with the COVID-19 global pandemic. As a result of the significant weight of this negative evidence, we believe it is more-likely-than-not that our U.S. net deferred income tax assets will not be fully realizable. Accordingly, we recorded a non-cash income tax charge of $
Additionally, we recorded a $713,000 income tax charge to provide for a full valuation allowance against a U.S. income tax loss carryforward that originated during the first half of fiscal 2021.
Based on our assessments as of November 1, 2020, November 3, 2019, and May 3, 2020, valuation allowances against our net deferred income taxes pertain to the following:
(dollars in thousands) |
|
November 1, 2020 |
|
|
November 3, 2019 |
|
|
May 3, 2020 |
|
|||
U.S. federal and state net deferred income tax assets |
|
$ |
8,543 |
|
|
|
711 |
|
|
|
867 |
|
U.S. capital loss carryforward |
|
|
2,281 |
|
|
|
— |
|
|
|
2,281 |
|
|
|
$ |
10,824 |
|
|
|
711 |
|
|
|
3,148 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Undistributed Earnings
In accordance with ASC Topic 740, we assess whether the undistributed earnings from our foreign subsidiaries will be reinvested indefinitely or eventually distributed to our U.S. parent company. ASC Topic 740 requires that a deferred income tax liability should be recorded for undistributed earnings from foreign subsidiaries that will not be reinvested indefinitely. Also, we assess the recognition of U.S. foreign income tax credits associated with foreign withholding and income tax payments and whether it is more-likely-than-not that our foreign income tax credits will not be realized. If it is determined that any foreign income tax credits need to be recognized or it is more-likely-than-not our foreign income tax credits will not be realized, an adjustment to our provision for income taxes will be recognized at that time.
Refer to Note 15 of the consolidated financial statements for disclosures regarding our assessments of our recorded deferred income tax liability balances associated with undistributed earnings from our foreign subsidiaries as of November 1, 2020, November 3, 2019, and May 3, 2020, respectively.
Uncertain Income Tax Positions
In accordance with ASC Topic 740, an unrecognized income tax benefit for an uncertain income tax position can be recognized in the first interim period during which the more-likely-than-not recognition threshold is met by the reporting period, or is effectively settled through examination, negotiation, or litigation, or the statute of limitations for the relevant taxing authority to examine and challenge the tax position has expired. If it is determined that any of the above conditions occur regarding our uncertain income tax positions, an adjustment to our unrecognized income tax benefits will be recorded at that time.
Refer to Note 15 located of the consolidated financial statements for disclosures regarding our assessments of our uncertain income tax positions as of November 1, 2020, November 3, 2019, and May 3, 2020, respectively.
Income Taxes Paid
During the first half of fiscal 2021, we received income tax refunds exceeding income tax payments, resulting in net cash tax payments of $556,000. The $556,000 resulted from (i) income tax refunds totaling $1.5 million associated with U.S. alternative minimum taxes (see United States section below for further details) that were partially offset by (ii) U.S. transition tax payments of $227,000 as required by the TCJA and (iii) income tax payments associated with our foreign jurisdictions totaling $726,000.
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During the first half of fiscal 2020, income tax payments totaling $2.8 million represented (i) income tax payments associated with foreign jurisdictions totaling $1.9 million and (ii) a withholding tax payment of $838,000 paid to the Chinese government for earnings and profits repatriated to our U.S. parent company.
United States
Alternative Minimum Tax (AMT)
Our AMT refunds totaling $1.5 million that were received during the first half of fiscal 2021 stem from the provisions of the TCJA, as corporate taxpayers were eligible to treat prior AMT credit carryforwards as refundable. Accordingly, we elected to treat our prior AMT credit carryforward balance of $1.5 million as refundable, and as a result, 50% of the $1.5 million refundable balance was expected to be received in each of our fiscal 2021 and fiscal 2022 years, respectively. We received our first 50% installment totaling $746,000 during the first quarter of fiscal 2021.
In accordance with the provisions of the CARES Act, 100% of AMT credit carryforwards for tax years beginning in the 2019 tax year were immediately refundable. Accordingly, we claimed credit for the remaining 50% installment of our refundable AMT credit carryforward in May 2020. We received our remaining 50% installment, plus interest, totaling $764,000 during the second quarter of fiscal 2021.
Future Liquidity
We currently do not expect to pay income taxes in the U.S. on a cash basis during fiscal 2021 due to: (i) our exclusion from the GILTI tax as a result of the U.S. Treasury regulations finalized and enacted on July 20, 2020; (ii) AMT income tax refunds totaling $1.5 million received during the first and second quarters of fiscal 2021; (iii) the immediate expensing of U.S. capital expenditures, and (iv) our existing U.S. federal net operating loss carryforwards totaling $21.9 million.
Liquidity and Capital Resources
Liquidity
Overall
Currently, our sources of liquidity include cash and cash equivalents, short-term investments (available for sale), cash flow from operations, and amounts available under our revolving credit lines. These sources have been adequate for day-to-day operations, capital expenditures, debt payments, common stock repurchases, and dividend payments. We believe our cash and cash equivalents of $45.3 million and short-term investments (available for sale) of $5.5 million as of November 1, 2020, cash flow from operations, and the current availability ($38.0 million) under our revolving credit lines will be sufficient to fund our foreseeable business needs and our contractual obligations.
As of November 1, 2020, our cash and cash equivalents, short-term investments (available for sale), and short-term and long-term investments (held-to-maturity) (collectively “cash and investments”) totaled $56.5 million, compared with $77.1 million as of May 3, 2020.
The decrease in our cash and investments from the end of fiscal 2020 is attributable to repayment of all of the outstanding borrowings associated with our U.S. and China lines of credit and the loan we received under the Paycheck Protection Program of the CARES Act (such loan, the “PPP loan”), which borrowings totaled $38.4 million. Excluding the repayments made on our lines of credit and the PPP loan, our cash and investments as of November 1, 2020, would have increased $17.8 million as compared to May 3, 2020. This increase was mostly due to (i) net cash provided by operating activities totaling $22.7 million, partially offset by (ii) cash payments of $2.6 million in the form of a regular quarterly dividend payment to shareholders; and (iii) $2.0 million of capital expenditures that were primarily related to our mattress fabrics segment.
Our net cash provided by operating activities was $22.7 million during the first half of fiscal 2021, compared with $8.2 million of net cash provided by operating activities during the first half of fiscal 2020. This increase reflects a focused attention on working capital management. Additionally, our discontinued operation had net cash used in operating activities totaling $2.2 million and net cash used in investing activities totaling $32,000 during the first half of fiscal 2020. Our discontinued operation had net cash provided by financing activities, all of which were loan proceeds and capital contributions from the company and the former non-controlling interest holder of eLuxury, totaling $2.4 million during the first half of fiscal 2020. We believe our liquidity has improved in the absence of the former home accessories segment due to the significant losses incurred by that segment and the funding of its working capital requirements primarily by us through loans and capital contributions that are no longer required.
I-44
As of November 1, 2020, there were no outstanding borrowings under our lines of credit.
The income taxes we pay also affects our liquidity. See the section titled “Income Taxes Paid” of this Item 2 - Management’s Discussion and Analysis of Financial Condition section for further details.
Our cash and cash equivalents and short-term investments (available for sale) balance may be adversely affected by factors beyond our control, such as the continuing uncertainty of the COVID-19 global pandemic, lower net sales due to consumer demand, and delays in receipt of payment on accounts receivable. Additionally, our cash liquidity will be affected by our strategic investments in working capital and planned capital expenditures during the last half of fiscal 2021.
By Geographic Area
A summary of our cash and cash equivalents, short-term investments (available for sale), and short-term and long-term investments (held-to-maturity) by geographic area follows:
(dollars in thousands) |
|
November 1, 2020 |
|
|
November 3, 2019 (1) |
|
|
May 3, 2020 |
|
|||
United States |
|
$ |
49,288 |
|
|
$ |
35,735 |
|
|
$ |
65,327 |
|
China |
|
|
5,778 |
|
|
|
9,439 |
|
|
|
10,531 |
|
Canada |
|
|
1,439 |
|
|
|
1,967 |
|
|
|
1,160 |
|
Cayman Islands |
|
|
9 |
|
|
|
42 |
|
|
|
42 |
|
|
|
$ |
56,514 |
|
|
$ |
47,183 |
|
|
$ |
77,060 |
|
(1) |
As of November 3, 2019, cash and cash equivalents totaled $47.2 million, of which $47.0 million and $228,000 were classified as (i) cash and cash equivalents and (ii) within current assets – discontinued operation, respectively, in the accompanying Consolidated Balance Sheets. |
As discussed above, the decrease in our cash and investments, specifically in the U.S., as of November 1, 2020, compared with May 3, 2020, is attributable to repayment of all of the outstanding borrowings associated with our lines of credit and PPP loan, which totaled $38.4 million.
Common Stock Repurchase Program
In March 2020, our board of directors approved an authorization for us to acquire up to $5.0 million of our common stock. Under the common stock repurchase program, shares may be purchased from time to time in open market transactions, block trades, through plans established under the Securities Exchange Act Rule 10b5-1, or otherwise. The number of shares purchased and the timing of such purchases will be based on working capital requirements, market and general business conditions, and other factors, including alternative investment opportunities.
As part of our comprehensive response to the COVID-19 global pandemic, we announced on April 3, 2020, that our board of directors temporarily suspended the share repurchase program given the ongoing economic disruption and uncertainty. Accordingly, we did not purchase any shares of our common stock through the end of our second quarter of fiscal 2020. Additionally, we did not purchase any share of our common stock during the six-month period ended November 3, 2019.
As of November 1, 2020, we had $5.0 million available for repurchases of our common stock.
Dividend Program
On December 3, 2020, we announced that our board of directors approved a quarterly cash dividend of $0.11 per share, or $0.44 per share on an annualized basis. This payment will be made on January 18, 2021, to shareholders of record as of January 8, 2021.
During the six-month period ended November 1, 2020, dividend payments totaled $2.6 million, which represented quarterly dividend payments of $0.105 per share. During the six-month period ended November 3, 2019, dividend payments totaled $2.5 million, which represented quarterly dividend payments of $0.10 per share.
Our board of directors has sole authority to determine if and when we will declare future dividends and on what terms. Future dividend payments are subject to final determination by our board of directors and will depend on our earnings, capital requirements, financial condition, excess availability under our lines of credit, market and economic conditions, and other factors we consider relevant.
I-45
Working Capital
Operating Working Capital
Operating working capital (accounts receivable and inventories, less accounts payable-trade, accounts payable-capital expenditures, and deferred revenue) was $42.0 million as of November 1, 2020, compared with $48.2 million as of November 3, 2019, and $49.4 million as of May 3, 2020. Operating working capital turnover was 5.3 during the second quarter of fiscal 2021, compared with 5.7 during the second quarter of fiscal 2020 and 5.1 during the fourth quarter of fiscal 2020.
Accounts Receivable
Accounts receivable as of November 1, 2020, totaling $33.0 million, increased $9.1 million, or 38.0%, compared with $23.9 million as of November 3, 2019. This increase reflects the increase in net sales during the second quarter of fiscal 2021 compared with the prior-year period. Net sales during the second quarter of fiscal 2021 were $76.9 million compared with $69.6 million during the second quarter of fiscal 2020. Additionally, this increase reflects slower cash collections on accounts receivable during the second quarter of fiscal 2021 compared with the second quarter of fiscal 2020 stemming from current economic conditions associated with the COVID-19 pandemic that were not present during the second quarter of fiscal 2020.
Accounts receivable as of November 1, 2020, totaling $33.0 million, increased $7.9 million, or 31.4%, compared with $25.1 million as of May 3, 2020. This increase reflects the substantial increase in net sales during the second quarter of fiscal 2021 compared with the fourth quarter of fiscal 2020. Net sales during the second quarter of fiscal 2021 were $76.9 million, an increase of $29.5 million, or 62%, compared with net sales of $47.4 million during the fourth quarter of fiscal 2020. Although we experienced a substantial increase in net sales during the second quarter of fiscal 2021, the increase in our accounts receivable also reflects faster cash collections during the second quarter of fiscal 2021 as compared to the fourth quarter of fiscal 2020. The faster cash collections stem from our customers’ return to making payments based on normal credit terms as opposed to the extended terms granted during the fourth quarter of fiscal 2020 in response to the COVID-19 pandemic.
Days’ sales outstanding were 39 days for the second quarter of fiscal 2021, compared with 30 days for the second quarter of fiscal 2020 and 48 days for the fourth quarter of fiscal 2020.
Inventory
Inventories as of November 1, 2020, totaling $47.7 million, decreased $3.7 million, or 7.2%, compared with $51.4 million as of November 3, 2019. Additionally, inventories as of November 1, 2020, totaling $47.7 million, were comparable with inventories totaling $47.9 million as of May 3, 2020. Although our net sales increased during the second quarter of fiscal 2021 compared with the second and fourth quarters of fiscal 2020, our trends in inventory reflect improved inventory management by better aligning our inventory purchases to reflect current demand trends.
Inventory turns were 5.6 for the second quarter of fiscal 2021, compared with 4.5 for the second quarter of fiscal 2020 and 3.5 for the fourth quarter of fiscal 2020.
Accounts Payable
Accounts payable- trade as of November 1, 2020, totaling $38.2 million, increased $11.9 million, or 45.2%, compared with $26.3 million as of November 3, 2019. Additionally, accounts payable- trade as of November 1, 2020, totaling $38.2 million, increased $15.2 million, or 66.3%, compared with $23.0 million as of May 3, 2020. The increase in accounts payable reflects our increase in net sales (and related raw material purchases) during the second quarter of fiscal 2021 compared with the second quarter and fourth quarters of fiscal 2020, as well as the negotiation of temporary credit terms with our vendors and landlords as part of our comprehensive response to the COVID-19 global pandemic.
Financing Arrangements
Currently, we have revolving credit agreements with banks for our U.S parent company and our operations located in China. The purposes of our revolving lines of credit are to support potential short-term cash needs in different jurisdictions, mitigate our risk associated with foreign currency exchange rate fluctuations, and ultimately repatriate earnings and profits from our foreign subsidiaries to our U.S. parent company to take advantage of the TCJA, which allows a U.S. corporation a 100% dividend received income tax deduction on earnings and profits repatriated to the U.S. from 10% owned foreign corporations.
As of November 1, 2020, we did not have any outstanding borrowings associated with our revolving credit agreements.
Our loan agreements require, among other things, that we maintain compliance with certain financial covenants. As of November 1, 2020, we were in compliance with these financial covenants.
I-46
Refer to Note 10 of the consolidated financial statements for further details of our revolving credit agreements.
Capital Expenditures and Depreciation
Overall
Capital expenditures on a cash basis were $2.0 million for the first half of fiscal 2021, compared with $2.4 million for the same period a year ago. Capital expenditures primarily related to our mattress fabrics segment for both periods.
Depreciation expense was $3.5 million for the first half of fiscal 2021, compared with $3.9 million for the same period a year ago. Depreciation expense mostly related to our mattress fabrics segment for both periods.
For fiscal 2021, we are projecting cash capital expenditures to be in the range of $8.5 million to $9.0 million. Depreciation expense is projected to be approximately $7.0 million in fiscal 2021. The estimated capital expenditures and depreciation expense for fiscal 2021 mostly relate to the mattress fabrics segment. These are management’s current expectations only, and changes in our business and the unknown duration and financial impact of the COVID-19 global pandemic could cause changes in plans for capital expenditures and expectations related to depreciation expense. Funding for capital expenditures is expected to be primarily from cash provided by operating activities.
Accounts Payable – Capital Expenditures
As of November 1, 2020, we had total amounts due regarding capital expenditures totaling $68,000 pertaining to outstanding vendor invoices, none of which were financed. The total amount outstanding of $68,000 is required to be paid based on normal credit terms.
Purchase Commitments – Capital Expenditures
As of November 1, 2020, we had open purchase commitments to acquire equipment for our mattress fabrics segment totaling $5.0 million.
Critical Accounting Policies and Recent Accounting Developments
As of November 1, 2020, there were no changes in our significant accounting policies or the application of those policies from those reported in our annual report on Form 10-K for the year ended May 3, 2020.
Refer to Note 2 of the consolidated financial statements for recently adopted and issued accounting pronouncements since the filing of our Form 10-K for the year ended May 3, 2020.
Contractual Obligations
Other than as disclosed in Notes 17 and 18 of the consolidated financial statements, as of November 1, 2020, there were no significant or new contractual obligations from those reported in our annual report on Form 10-K for the year ended May 3, 2020.
Inflation
Any significant increase in our raw material costs, utility/energy costs, and general economic inflation could have a material adverse impact on the company, because competitive conditions have limited our ability to pass significant operating cost increases on to customers.
ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk from changes in interest rates with regards to our revolving credit agreements.
Our U.S. revolving credit agreement requires interest to be charged at a rate (applicable interest rate of 1.74% at November 1, 2020) as a variable spread over LIBOR based on the company’s ratio of debt to EBITDA as defined in the U.S. revolving credit agreement. As of November 1, 2020, there were no outstanding borrowings under our U.S. revolving credit agreement. Our revolving credit agreements associated with our operations located in China bear interest at a rate determined by the Chinese government at the time of borrowing. As of November 1, 2020, there were not any borrowing outstanding pursuant to our revolving credit agreements associated with our operations located in China.
We are exposed to market risk from changes in the value of foreign currencies for our subsidiaries domiciled in Canada and China. We try to maintain a natural hedge by keeping a balance of our assets and liabilities denominated in the local currency of
I-47
our subsidiaries domiciled in Canada and China, although there is no assurance that we will be able to continually maintain this natural hedge. Our foreign subsidiaries use the United States dollar as their functional currency. A substantial portion of the company’s imports purchased outside the United States are denominated in U.S. dollars. As a result, a 10% change in the above exchange rates as of November 1, 2020, would not have materially affected our results of operations or financial position.
ITEM 4.CONTROLS AND PROCEDURES
As of November 1, 2020, we conducted an evaluation of the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). This evaluation was conducted under the supervision and with the participation of our management, including our Executive Chairman, Chief Executive Officer, and Chief Financial Officer. Based upon that evaluation, our Executive Chairman, Chief Executive Officer, and Chief Financial Officer concluded that these disclosure controls and procedures were effective as of such date, in all material respects, to ensure that information required to be disclosed in the reports filed by us and submitted under the Exchange Act, is recorded, processed, summarized, and reported as and when required, and that these disclosure controls and procedures were effective as of such date to ensure that information required to be disclosed in reports filed by us under the Exchange Act is accumulated and communicated to management, including our Executive Chairman, Chief Executive Officer, and Chief Financial Officer, in a manner to allow timely decisions regarding the required disclosure.
During the quarter ended November 1, 2020, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
I-48
Part II – Other Information
Item 1.Legal Proceedings
There have not been any material changes to our legal proceedings during the three months ended November 1, 2020. Our legal proceedings are disclosed in the company’s annual report on Form 10-K filed with the Securities and Exchange Commission on July 17, 2020, for the fiscal year ended May 3, 2020.
Item 1A.Risk Factors
There have not been any material changes to our risk factors during the three months ended November 1, 2020. Our risk factors are disclosed in Item 1A “Risk Factors” of the company’s annual report on Form 10-K filed with the Securities and Exchange Commission on July 17, 2020 for the fiscal year ended May 3, 2020.
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
ISSUER PURCHASES OF EQUITY SECURITIES
|
|
|
|
|
|
|
|
|
|
(c) |
|
|
(d) |
|
||
|
|
|
|
|
|
|
|
|
|
Total Number of |
|
|
Approximate |
|
||
|
|
(a) |
|
|
|
|
|
|
Shares Purchased |
|
|
Dollar Value of |
|
|||
|
|
Total |
|
|
(b) |
|
|
as Part of |
|
|
Shares that May |
|
||||
|
|
Number |
|
|
Average |
|
|
Publicly |
|
|
Yet Be Purchased |
|
||||
|
|
of Shares |
|
|
Price Paid |
|
|
Announced Plans |
|
|
Under the Plans or |
|
||||
Period |
|
Purchased |
|
|
per Share |
|
|
or Programs |
|
|
Programs (1) |
|
||||
August 3, 2020 to September 6, 2020 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
$ |
5,000,000 |
|
September 7, 2020 to October 4, 2020 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
$ |
5,000,000 |
|
October 5, 2020 to November 1, 2020 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
$ |
5,000,000 |
|
Total |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
$ |
5,000,000 |
|
(1) |
In March 2020, our board of directors approved an authorization for us to acquire up to $5.0 million of our common stock. As part of our comprehensive response to the COVID-19 pandemic, we announced on April 3, 2020, that our board of directors temporarily suspended the share repurchase program given the ongoing economic disruption and uncertainty. |
II-1
Item 6.Exhibits
The following exhibits are submitted as part of this report.
10.1 |
|
|
|
|
|
|
|
10.2 |
|
|
|
|
|
|
|
31.1 |
|
|
|
|
|
|
|
31.2 |
|
|
|
|
|
|
|
31.3 |
|
Certification of Chief Financial Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
32.1 |
|
|
|
|
|
|
|
32.2 |
|
|
|
|
|
|
|
32.3 |
|
Certification of Chief Financial Officer Pursuant to Section 906 of Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
101.INS |
|
Inline XBRL Instance Document |
|
|
|
|
|
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document |
|
|
|
|
|
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
|
|
|
|
|
101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase Document |
|
|
|
|
|
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
|
|
|
|
|
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document |
|
|
|
|
|
104 |
|
Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101). |
|
II-2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
|
CULP, INC. (Registrant) |
|
|
|
|
|
Date: December 11, 2020 |
|
By: |
|
/s/ Kenneth R. Bowling |
|
|
|
|
Kenneth R. Bowling |
|
|
|
|
Executive Vice President and Chief Financial Officer |
|
|
|
|
(Authorized to sign on behalf of the registrant and also signing as principal financial officer) |
|
|
|
|
|
|
|
|
|
|
|
|
By: |
|
/s/ Thomas B. Gallagher, Jr. |
|
|
|
|
Thomas B. Gallagher, Jr. |
|
|
|
|
Corporate Controller |
|
|
|
|
(Authorized to sign on behalf of the registrant and also signing as principal accounting officer) |
II-3
EXHIBIT INDEX
Exhibit Number |
|
Exhibit |
|
|
|
10.1 |
|
|
|
|
|
10.2 |
|
|
|
|
|
31.1 |
|
|
|
|
|
31.2 |
|
|
|
|
|
31.3 |
|
Certification of Chief Financial Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002. |
|
|
|
32.1 |
|
|
|
|
|
32.2 |
|
|
|
|
|
32.3 |
|
Certification of Chief Financial Officer Pursuant to Section 906 of Sarbanes-Oxley Act of 2002. |
|
|
|
101.INS |
|
XBRL Instance Document |
|
|
|
101.SCH |
|
XBRL Taxonomy Extension Schema Document |
|
|
|
101.CAL |
|
XBRL Taxonomy Extension Calculation Linkbase Document |
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101.LAB |
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XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE |
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XBRL Taxonomy Extension Presentation Linkbase Document |
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101.DEF |
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XBRL Taxonomy Extension Definition Linkbase Document |
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104 |
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Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101) |
II-4
EXHIBIT 10.1
ANNUAL INCENTIVE AWARD AGREEMENT
THIS ANNUAL INCENTIVE AWARD AGREEMENT (the “Agreement”), dated as of ___________________, is between CULP, INC., a North Carolina corporation (the “Corporation”), and ____________________ (“Recipient”).
Background Statement
The Corporation desires to grant to Recipient an Annual Incentive Award (the “Award”) pursuant to the Culp, Inc. 2015 Equity Incentive Plan (the “Plan”). Capitalized terms used but not defined in this Agreement shall have the meanings given to them in the Plan.
STATEMENT OF AGREEMENT
NOW, THEREFORE, the parties hereby agree as follows:
Section 1.Grant of Award. The Corporation hereby grants to Recipient the Award described below.
The Award will pay an incentive bonus for the Performance Period stated below to Recipient upon determination by the Compensation Committee (the “Committee”) of the Corporation’s board of directors that a bonus payment is due pursuant to the terms of this Agreement and the Plan.
The bonus payment due hereunder is calculated with reference to the Total Bonus Percentage for the Reporting Unit in which Recipient participates. The bonus due to Recipient is the Total Bonus Percentage for Recipient’s Reporting Unit multiplied by Recipient’s Bonus Opportunity.
Performance Period: The Corporation’s fiscal year ending ____________.
Reporting Unit: ____________ [or the ____________ Division (the “Division”)]
Bonus Opportunity: Recipient’s Bonus Opportunity is _____% of Recipient’s base salary during the Performance Period.
Total Bonus Percentage for a Reporting Unit is calculated using the percentage amounts derived from Schedule A attached hereto, 50% of which is based upon the total Adjusted Operating Income results for Recipient’s Reporting Unit during the Performance Period (the “OI Bonus Percentage”), and 50% of which is based upon the total Adjusted Free Cash Flow results for Recipient’s Reporting Unit during the Performance Period (the “FCF Bonus Percentage”), in each case with straight line interpolation being used to determine OI Bonus Percentage and FCF Bonus Percentage amounts between the amounts shown on Schedule A. Upon determination of the OI Bonus Percentage and the FCF Bonus Percentage, the Total Bonus Percentage is calculated as follows: (50% multiplied by the OI Bonus Percentage) plus (50% multiplied by the FCF Bonus Percentage) = Total Bonus Percentage. The maximum Bonus Percentage for this award is 200%.
“Adjusted Operating Income” shall mean operating income for a Reporting Unit as calculated and recorded on the Reporting Unit’s financial statements, but excluding (prior to) the payment of bonus payments related to bonuses awarded under this form of Agreement under the annual incentive plan, and also excluding extraordinary and non-recurring items including restructuring and related charges, goodwill or fixed asset impairment charges, prepayment fees on debt, other extraordinary charges or credits, and the effects of acquisitions, and also excluding any other items that the Committee deems appropriate for exclusion.
“Adjusted Free Cash Flow” (i) for the Corporate Shared Services Reporting Unit shall mean such Reporting Unit’s net cash provided by (used in) operating activities (which shall include and be calculated using the Adjusted Operating Income, as defined above, for the Reporting Unit), less cash capital expenditures, less payments on vendor-financed capital expenditures, plus any proceeds from sale of property, plant, and equipment, less investment in unconsolidated joint venture, plus proceeds from life insurance policies, less premium payments on life insurance policies, plus proceeds from the sale of long-term investments associated with the Corporation’s rabbi trust, less the purchase of long-term investments associated with the Corporation’s rabbi trust, and plus or minus the effects of exchange rate changes on cash and cash equivalents, in each case as calculated and reported on the Reporting Unit’s financial statements, and also excluding any other items that the Committee deems appropriate for exclusion; and (ii) for each Division Reporting Unit shall mean such Division’s cash from earnings (which shall include and be calculated using Adjusted Operating Income, as defined above, for the Division), plus cash from working capital, less cash capital expenditures, and plus proceeds from sale of property, plant, and equipment, in each case as calculated and reported by the Division, and also excluding any other items the Committee deems appropriate for exclusion.
Section 2.Vesting. The bonus amount to be paid hereunder will vest and become payable upon final determination of the amount to be paid by the Corporation and the Committee.
Notwithstanding the foregoing, all unvested Awards (and a bonus payment at Recipient’s Bonus Opportunity) shall immediately vest and become payable upon the occurrence of the following:
(a)termination of Recipient’s employment by reason of the death or Disability of Recipient; or
(b)Recipient’s employment is terminated by the Corporation in anticipation of a Change of Control, or
(c)Recipient is employed by the Corporation or an affiliate thereof at the time a Change of Control occurs, and at any time during the 18-month period following such Change of Control (provided that the bonus payment provided for hereunder shall have not already become due and been paid),
(i)Recipient’s employment is terminated by the Corporation or an affiliate thereof for any reason other than for death, Disability or Cause, or
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(ii)Recipient terminates his/her employment for Good Reason within one year following the initial existence of the conditions giving rise to such Good Reason.
Section 3.Additional Definitions. For purposes of this Agreement, the following terms shall have the meanings indicated below:
“Cause” shall mean (i) the commission by Recipient of a felony (or crime involving moral turpitude); (ii) theft, conversion, embezzlement or misappropriation by Recipient of funds or other assets of the Corporation or its Subsidiaries or any other act of fraud with respect to the Corporation or its Subsidiaries (including without limitation the acceptance of bribes or kickbacks or other acts of self-dealing); (iii) intentional, grossly negligent or unlawful misconduct by Recipient that causes significant harm to the Corporation or its Subsidiaries; or (iv) repeated instances of intoxication with alcohol or drugs while conducting business during regular business hours.
“Change of Control” shall have the meaning given to such term in the Plan. In addition, for an award that vests according to Adjusted Operating Income or Adjusted Free Cash Flow of a Division, “Change of Control” shall be deemed to have occurred upon consummation of a sale of all or substantially all of the assets of such Division by the Corporation to an unaffiliated third party.
“Disability” shall have the meaning given to such term in the primary disability benefit plan of the Corporation in which Recipient participates. In the absence of any such plan, “Disability” shall mean any physical or mental impairment that renders Recipient unable to perform the essential functions of Recipient’s job with the Corporation and its Subsidiaries for a period of at least 120 days, either with or without reasonable accommodation. At the Corporation’s request, Recipient shall submit to an examination by a duly licensed physician who is mutually acceptable to the Corporation and Recipient for the purpose of ascertaining the existence of a Disability, and shall authorize the physician to release the results of Recipient’s examination to the Corporation.
“Good Reason” shall mean, without Recipient’s express written consent, the existence of any of the following conditions unless such conditions are fully corrected within thirty days after Recipient notifies the Corporation of the existence of such conditions as hereinafter provided:
(a)a material diminution in Recipient’s authority, duties or responsibilities;
(b)a material diminution in the authority, duties or responsibilities of the supervisor to whom Recipient is required to report;
(c)a material diminution in Recipient’s base salary, other than as a result of across-the-board salary reductions similarly affecting all management personnel of the Corporation; or
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(d)a material change in the geographic location at which Recipient must regularly perform services for the Corporation.
Recipient shall notify the Corporation that he/she believes that one or more of the conditions described above exists, and of his/her intention to terminate employment for Good Reason as a result thereof, within sixty days after the time that he/she gains knowledge of such conditions. Recipient shall not deliver a notice of termination of employment for Good Reason until thirty days after he/she delivers the notice described in the preceding sentence, and Recipient may do so only if the conditions described in such notice have not been fully corrected by the Corporation.
Section 4.Settlement.
As soon as reasonably practicable following a determination by the Corporation that a bonus payment is due hereunder, the bonus will be paid in cash, or will be paid in accordance with any proper and valid election under the Culp, Inc. Deferred Compensation Plan for Key Employees, but only if such election has been made in accordance with the policies and procedures of the Corporation pursuant to such plan.
Section 5.Forfeiture. All bonus amounts that do not vest pursuant to Section 2 shall automatically be cancelled and forfeited by Recipient effective as of the earlier to occur of (a) the first day after the end of the Performance Period (to the extent that neither Adjusted Operating Income nor Adjusted Free Cash Flow for the relevant Reporting Unit is sufficient to cause any bonus payment to vest pursuant to the terms of this Agreement), (b) the termination by Recipient of his/her employment with the Corporation or its Subsidiaries for any reason, except as otherwise determined by the Committee, in its sole discretion (for example, under circumstances in which Recipient will continue providing Services to the Corporation as a director, consultant, or independent contractor following any such termination by Recipient, or such other circumstances as determined by the Committee), or (c) the termination by the Corporation of Recipient’s employment with the Corporation or its Subsidiaries for any reason (including with or without Cause) (each such event being referred to herein as a “Forfeiture Event”). Upon the occurrence of a Forfeiture Event, all unvested bonus amounts shall automatically, without further action by the Corporation or Recipient, be cancelled and forfeited.
Section 6.Tax Matters.
(a)Recipient shall promptly pay to the Corporation all federal, state and local income, social security and payroll taxes of any kind required by law to be withheld with respect to the vesting or payment of a bonus hereunder, and the Corporation, to the extent permitted by law, have the right to deduct from any payment of any kind otherwise due to Recipient all federal, state and local income, social security and payroll taxes of any kind required by law to be withheld with respect to the vesting or payment of a bonus earned hereunder.
(b)Notwithstanding anything in this Agreement to the contrary, if a Change of Control occurs and if Recipient is entitled under any agreement or arrangement (including, without limitation, this Agreement) to receive compensation that would constitute a parachute payment (including, without limitation, the vesting of any rights)
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within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”) but for the operation of this sentence, then the amount of all such payments shall be reduced, as determined by the Corporation, to the extent necessary to cause the aggregate present value of all payments in the nature of compensation to Recipient that are contingent on a change in the ownership or effective control of the Corporation, or in the ownership of a substantial portion of the assets of the Corporation, not to exceed 2.99 times Recipient’s “base amount,” all within the meaning of Section 280G of the Code and the regulations promulgated thereunder. The parties intend for the immediately preceding sentence to be interpreted and applied so as to prevent Recipient from receiving, with respect to a Change of Control, an excess parachute payment within the meaning of Section 280G of the Code.
Section 7.Clawback.
(a)If the Corporation’s reported financial or operating results become subject to a material negative restatement, the Committee may require Recipient to pay to the Corporation an amount corresponding to the amount that the Committee determines would not have been vested or paid if the Corporation’s results as originally published had been equal to the Corporation’s results as subsequently restated; provided that any requirement or claim under this Section 7(a) must be made, if at all, within five years after the date the amount claimed was originally vested or paid, whichever is later.
In the alternative, the Committee may require Recipient to repay or return compensation awarded hereunder pursuant to such rules as may be adopted from time to time pursuant to Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, to the extent applicable. By acceptance of any Award or bonus payment hereunder, Recipient expressly acknowledges and agrees that any and all amounts paid to Recipient hereunder are and will be fully subject to the terms of any policy regarding repayment, recoupment or clawback of compensation now or hereafter adopted by the Corporation in response to the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act, rulemaking of the Securities and Exchange Commission or otherwise. Recipient acknowledges and agrees that any such policy will apply to any and all bonus amounts paid hereunder in accordance with its terms, whether retroactively or prospectively, and agrees to cooperate fully with the Corporation to facilitate the recovery of any that the Committee determines in its sole discretion is required to be recovered pursuant to the terms of such policy.
The obligations of Recipient to make payments or return bonus amounts paid hereunder under this Section 7(a) are independent of any involvement by such Recipient in events that led to the restatement. The provisions of this Section 7(a) are in addition to, not in lieu of, any remedies that the Corporation may have against any persons whose misconduct caused or contributed to a need to restate the Corporation’s reported results.
(b)If at any time within three years of the vesting or payment of any award to Recipient under this Agreement, whichever is later, Recipient’s employment is terminated for Cause (or, if such termination is deemed not to be for Cause, but the Corporation determines at any time during such three-year period that the Corporation could have terminated Recipient’s employment for Cause based on Recipient’s conduct
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during his or her time of employment with the Corporation), then if any part of the underlying conduct or circumstances giving rise to such determination of Cause by the Corporation took place at any time during the applicable vesting period for each such award, as specified in this Agreement, then the Committee may require Recipient to pay to the Corporation an amount corresponding to each award that vested or was paid to Recipient pursuant to this Agreement, or to otherwise return such Units or Common Stock.
By acceptance of any award or Units hereunder, Recipient expressly acknowledges and agrees that any and all Units or Common Stock, as well as the equivalent cash value thereof with respect to any and all such Units or Common Stock, that have become vested, exercised, free of restriction or otherwise released to and/or monetized by or for the benefit of Recipient or any transferee or assignee thereof (collectively, the “Award-Equivalent Value”), are and will be fully subject to the terms of the foregoing clawback provision, and agrees to cooperate fully with the Corporation to facilitate the recovery of any Units or Common Stock and/or Award-Equivalent Value that the Committee requires to be recovered pursuant to the foregoing.
Section 8.Miscellaneous.
(a)Governing Law. This Agreement shall be construed, administered and governed in all respects under and by the applicable internal laws of the State of North Carolina, without giving effect to the principles of conflicts of laws thereof.
(b)Entire Agreement; Amendment and Waiver. This Agreement and the Award granted hereunder shall be subject to the terms of the Plan, which hereby is incorporated into this Agreement as though set forth in full herein. Recipient hereby acknowledges receipt of a copy of the Plan. This Agreement and the Plan reflect the entire agreement between the parties hereto and supersede any prior or contemporaneous written or oral understanding or agreement regarding the subject matter hereof. This Agreement may not be modified, amended, supplemented or waived except by a writing signed by the parties hereto, and such writing must refer specifically to this Agreement.
(c)Assignment; Binding Effect. Except as permitted by the Plan, this Agreement and the Award granted hereunder may not be assigned, pledged, hypothecated or transferred by Recipient in any manner. This Agreement, as amended from time to time, shall be binding upon, inure to the benefit of and be enforceable by the heirs, successors and assigns of the parties hereto; provided, however, that this provision shall not permit any assignment in contravention of the terms contained elsewhere herein.
(d)No Right to Employment. Nothing in this Agreement shall confer on Recipient any right to continue in the employ of the Corporation or any of its Subsidiaries.
(e)Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Delivery of an executed counterpart of this Agreement by facsimile or other electronic device shall be equally as effective as
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delivery of an original executed counterpart of this Agreement. Any party delivering an executed counterpart of this Agreement by facsimile or other electronic device shall also deliver an original executed counterpart of this Agreement, but the failure to deliver an original executed counterpart of this Agreement shall not affect the validity, enforceability and binding effect of this Agreement.
(f)Notices. Any notice hereunder to the Corporation shall be addressed to the Corporation’s principal executive office, Attention: Compensation Committee, and any notice hereunder to Recipient shall be addressed to Recipient at his last address in the records of the Corporation, subject to the right of either party to designate at any time hereafter in writing a different address. Any notice shall be deemed to have been given when delivered personally, one (1) day after dispatch if sent by reputable overnight courier, fees prepaid, or three (3) days following mailing if sent by registered mail, return receipt requested, postage prepaid and addressed as set forth above.
[Signature page is the next page.]
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IN WITNESS WHEREOF, this Agreement has been duly executed as of the date first written above.
CULP, INC., |
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OI Bonus Percentage |
Adjusted Operating Income Results |
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0% |
Below $__ |
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X |
X |
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X |
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X |
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X |
X |
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100% |
Target Level |
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X |
X |
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X |
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X |
X |
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__% |
Maximum |
FCF Bonus Percentage |
Adjusted Free Cash Flow Results |
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0% |
Less than $__ |
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X |
X |
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X |
X |
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X |
X |
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100% |
Target Level |
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Maximum |
A-1
EXHIBIT 10.2
RESTRICTED STOCK UNIT AGREEMENT
THIS RESTRICTED STOCK UNIT AGREEMENT (the “Agreement”), dated as of______________, is between CULP, INC., a North Carolina corporation (the “Corporation”), and_________________ (“Recipient”).
Background Statement
The Corporation desires to grant to Recipient Restricted Stock Units (the “Units”) pursuant to the Culp, Inc. 2015 Equity Incentive Plan (the “Plan”). Capitalized terms used but not defined in this Agreement shall have the meanings given to them in the Plan.
STATEMENT OF AGREEMENT
NOW, THEREFORE, the parties hereby agree as follows:
Section 1.Grant of Units. The Corporation hereby grants to Recipient ______ Units. Each Unit shall entitle Recipient to receive, upon vesting thereof in accordance with this Agreement and the Plan, one (1) share of common stock, par value $0.05 per share, of the Corporation (“Common Stock”). Except as permitted by the Plan, the Units may not be assigned, pledged, hypothecated or transferred in any manner. Recipient shall not have, with respect to any Units, any rights of a shareholder of the Corporation, including without limitation any right to vote as a shareholder of the Corporation or any right to receive distributions from the Corporation in respect of the Units.
Section 2.Vesting. Except as may otherwise be provided in the Plan or this Agreement, the Units shall vest in the amounts set forth below:
On __________ , 20_____________ shares of Common Stock
Notwithstanding the foregoing, all unvested Units (at the rate of one (1) share of Common Stock per Unit) shall immediately vest upon:
(a)termination of Recipient’s employment by reason of the death or Disability of Recipient; or
(b)Recipient’s employment is terminated by the Corporation in anticipation of a Change of Control, or
(c)Recipient is employed by the Corporation or an affiliate thereof at the time a Change of Control occurs, and at any time during the three-year period following such Change of Control (provided that the Units granted hereunder and related shares have not otherwise vested),
(i)Recipient’s employment is terminated by the Corporation or an affiliate thereof for any reason other than for death, Disability or Cause, or
(ii)Recipient terminates his/her employment for Good Reason within one year following the initial existence of the conditions giving rise to such Good Reason.
Section 3.Definitions. For purposes of this Agreement, the following terms shall have the meanings indicated below:
“Cause” shall mean (i) the commission by Recipient of a felony (or crime involving moral turpitude); (ii) theft, conversion, embezzlement or misappropriation by Recipient of funds or other assets of the Corporation or its Subsidiaries or any other act of fraud with respect to the Corporation or its Subsidiaries (including without limitation the acceptance of bribes or kickbacks or other acts of self-dealing); (iii) intentional, grossly negligent or unlawful misconduct by Recipient that causes significant harm to the Corporation or its Subsidiaries; or (iv) repeated instances of intoxication with alcohol or drugs while conducting business during regular business hours.
“Change of Control” shall have the meaning given to such term in the Plan.
“Disability” shall have the meaning given to such term in the primary disability benefit plan of the Corporation in which Recipient participates. In the absence of any such plan, “Disability” shall mean any physical or mental impairment that renders Recipient unable to perform the essential functions of Recipient’s job with the Corporation and its Subsidiaries for a period of at least 120 days, either with or without reasonable accommodation. At the Corporation’s request, Recipient shall submit to an examination by a duly licensed physician who is mutually acceptable to the Corporation and Recipient for the purpose of ascertaining the existence of a Disability, and shall authorize the physician to release the results of Recipient’s examination to the Corporation.
“Good Reason” shall mean, without Recipient’s express written consent, the existence of any of the following conditions unless such conditions are fully corrected within thirty days after Recipient notifies the Corporation of the existence of such conditions as hereinafter provided:
(a)a material diminution in Recipient’s authority, duties or responsibilities;
(b)a material diminution in the authority, duties or responsibilities of the supervisor to whom Recipient is required to report, including a requirement that Recipient report to a Corporation officer or employee instead of reporting directly to the Corporation’s board of directors;
(c)a material diminution in Recipient’s base salary, other than as a result of across-the-board salary reductions similarly affecting all management personnel of the Corporation; or
(d)a material change in the geographic location at which Recipient must regularly perform services for the Corporation.
Recipient shall notify the Corporation that he/she believes that one or more of the conditions described above exists, and of his/her intention to terminate employment for Good Reason as a result thereof, within sixty days after the time that he/she gains knowledge of such conditions. Recipient shall not deliver a notice of termination of employment for Good Reason until thirty days after he/she delivers the notice described in the preceding sentence, and Recipient may do so only if the conditions described in such notice have not been fully corrected by the Corporation.
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Section 4.Settlement. As soon as reasonably practicable following a determination by the Corporation that all or part of the Units have vested pursuant to the terms of this Agreement, the Corporation shall issue directly to Recipient shares of Common Stock with respect to all such Units that have vested. Such shares of Common Stock shall not be treated as issued and outstanding until such shares have been issued by the Corporation in accordance with all applicable laws and the Corporation’s bylaws and articles of incorporation. Any certificate(s) evidencing shares of Common Stock shall bear such legends as the Corporation shall determine to be necessary to comply with all laws, including all applicable federal and state securities laws. All such shares of Common Stock issued pursuant to this Agreement shall be fully paid and nonassessable.
Section 5.Forfeiture. All Units that do not vest pursuant to Section 2 shall automatically be cancelled and forfeited by Recipient effective as of the earlier to occur of (a) the termination by Recipient of his/her employment with the Corporation or its Subsidiaries for any reason, except as otherwise determined by the Compensation Committee (the “Committee”) of the Corporation’s board of directors, in its sole discretion (for example, under circumstances in which Recipient will continue providing Services to the Corporation as a director, consultant, or independent contractor following any such termination by Recipient, or such other circumstances as determined by the Committee), or (b) the termination by the Corporation of Recipient’s employment with the Corporation or its Subsidiaries for any reason (including with or without Cause) (each such event being referred to herein as a “Forfeiture Event”). Upon the occurrence of a Forfeiture Event, all unvested Units shall automatically, without further action by the Corporation or Recipient, be cancelled and forfeited.
Section 6.Tax Matters.
(a)Recipient shall promptly pay to the Corporation all federal, state and local income, social security and payroll taxes of any kind required by law to be withheld with respect to the vesting of any Units and the issuance of shares of Common Stock in respect thereof. Subject to the approval of the Committee, Recipient may elect to satisfy this obligation by having the Corporation withhold shares of Common Stock that would otherwise be issued to Recipient with respect to any Units that have vested, which shares of Common Stock shall have a Fair Market Value (as of the date that the amount of the withholding requirement is to be determined) equal to the amount of such withholding requirement. If Recipient fails to make such payments as required (whether in cash or having shares of Common Stock withheld), the Corporation shall, to the extent permitted by law, have the right to deduct from any payment of any kind otherwise due to Recipient all federal, state and local income, social security and payroll taxes of any kind required by law to be withheld with respect to the vesting of Units and the issuance of shares of Common Stock in respect thereof.
(b)Notwithstanding anything in this Agreement to the contrary, if a Change of Control occurs and if Recipient is entitled under any agreement or arrangement (including, without limitation, this Agreement) to receive compensation that would constitute a parachute payment (including, without limitation, the vesting of any rights) within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”) but for the operation of this sentence, then the amount of all such payments shall be reduced, as determined by the Corporation, to the extent necessary to cause the
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aggregate present value of all payments in the nature of compensation to Recipient that are contingent on a change in the ownership or effective control of the Corporation, or in the ownership of a substantial portion of the assets of the Corporation, not to exceed 2.99 times Recipient’s “base amount,” all within the meaning of Section 280G of the Code and the regulations promulgated thereunder. The parties intend for the immediately preceding sentence to be interpreted and applied so as to prevent Recipient from receiving, with respect to a Change of Control, an excess parachute payment within the meaning of Section 280G of the Code.
Section 7.Clawback. If at any time within three years of the vesting or payment of any award to Recipient under this Agreement, whichever is later, Recipient’s employment is terminated for Cause (or, if such termination is deemed not to be for Cause, but the Corporation determines at any time during such three-year period that the Corporation could have terminated Recipient’s employment for Cause based on Recipient’s conduct during his or her time of employment with the Corporation), then if any part of the underlying conduct giving rise to such determination of Cause by the Corporation took place at any time during the applicable vesting period for each such award, as specified in this Agreement, then the Committee may require Recipient to pay to the Corporation an amount corresponding to each award that vested or was paid to Recipient pursuant to this Agreement, or to otherwise return such Units or Common Stock.
By acceptance of any award or Units hereunder, Recipient expressly acknowledges and agrees that any and all Units or Common Stock, as well as the equivalent cash value thereof with respect to any and all such Units or Common Stock, that have become vested, exercised, free of restriction or otherwise released to and/or monetized by or for the benefit of Recipient or any transferee or assignee thereof (collectively, the “Award-Equivalent Value”), are and will be fully subject to the terms of the foregoing clawback provision, and agrees to cooperate fully with the Corporation to facilitate the recovery of any Units or Common Stock and/or Award-Equivalent Value that the Committee requires to be recovered pursuant to the foregoing.
Section 8.Miscellaneous.
(a)Governing Law. This Agreement shall be construed, administered and governed in all respects under and by the applicable internal laws of the State of North Carolina, without giving effect to the principles of conflicts of laws thereof.
(b)Entire Agreement; Amendment and Waiver. This Agreement and the Units granted hereunder shall be subject to the terms of the Plan, which hereby is incorporated into this Agreement as though set forth in full herein. Recipient hereby acknowledges receipt of a copy of the Plan. This Agreement and the Plan reflect the entire agreement between the parties hereto and supersede any prior or contemporaneous written or oral understanding or agreement regarding the subject matter hereof. This Agreement may not be modified, amended, supplemented or waived except by a writing signed by the parties hereto, and such writing must refer specifically to this Agreement.
(c)Assignment; Binding Effect. Except as permitted by the Plan, this Agreement and the Units granted hereunder may not be assigned, pledged, hypothecated or transferred by Recipient in any manner. This Agreement, as amended from time to
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time, shall be binding upon, inure to the benefit of and be enforceable by the heirs, successors and assigns of the parties hereto; provided, however, that this provision shall not permit any assignment in contravention of the terms contained elsewhere herein.
(d)No Right to Employment. Nothing in this Agreement shall confer on Recipient any right to continue in the employ of the Corporation or any of its Subsidiaries.
(e)Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Delivery of an executed counterpart of this Agreement by facsimile or other electronic device shall be equally as effective as delivery of an original executed counterpart of this Agreement. Any party delivering an executed counterpart of this Agreement by facsimile or other electronic device shall also deliver an original executed counterpart of this Agreement, but the failure to deliver an original executed counterpart of this Agreement shall not affect the validity, enforceability and binding effect of this Agreement.
(f)Notices. Any notice hereunder to the Corporation shall be addressed to the Corporation’s principal executive office, Attention: Compensation Committee, and any notice hereunder to Recipient shall be addressed to Recipient at his/her last address in the records of the Corporation, subject to the right of either party to designate at any time hereafter in writing a different address. Any notice shall be deemed to have been given when delivered personally, one (1) day after dispatch if sent by reputable overnight courier, fees prepaid, or three (3) days following mailing if sent by registered mail, return receipt requested, postage prepaid and addressed as set forth above.
[Signature page is the next page.]
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IN WITNESS WHEREOF, this Agreement has been duly executed as of the date first written above.
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Exhibit 31.1
CERTIFICATIONS
I, Franklin N. Saxon, certify that:
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I have reviewed this Form 10-Q of Culp, Inc.; |
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
(c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
(d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
|
|
/s/ Franklin N. Saxon |
|
|
Franklin N. Saxon |
|
|
Executive Chairman |
|
|
(Co-Principal Executive Officer) |
Date: December 11, 2020
Exhibit 31.2
CERTIFICATIONS
I, Robert G. Culp, IV, certify that:
1. |
I have reviewed this Form 10-Q of Culp, Inc.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
(c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
(d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
|
|
/s/ Robert G. Culp, IV |
|
|
Robert G. Culp, IV |
|
|
Chief Executive Officer |
|
|
(Co-Principal Executive Officer) |
Date: December 11, 2020
Exhibit 31.3
CERTIFICATIONS
I, Kenneth R. Bowling, certify that:
1. |
I have reviewed this Form 10-Q of Culp, Inc.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
(c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
(d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
|
|
/s/ Kenneth R. Bowling |
|
|
Kenneth R. Bowling |
|
|
Executive Vice President and Chief Financial Officer |
|
|
(Principal Financial Officer) |
Date: December 11, 2020
Exhibit 32.1
Certification Pursuant to
18 U.S.C. Section 1350,
as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report of Culp, Inc. (the “Company”) on Form 10-Q for the period ended November 1, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Franklin N. Saxon, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
/s/ Franklin N. Saxon |
Franklin N. Saxon |
Executive Chairman |
December 11, 2020
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906 has been provided to Culp, Inc. and will be retained by Culp, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
Certification Pursuant to
18 U.S.C. Section 1350,
as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report of Culp, Inc. (the “Company”) on Form 10-Q for the period ended November 1, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Robert G. Culp, IV, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
/s/ Robert G. Culp, IV |
Robert G. Culp, IV |
Chief Executive Officer |
December 11, 2020
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906 has been provided to Culp, Inc. and will be retained by Culp, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.3
Certification Pursuant to
18 U.S.C. Section 1350,
as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report of Culp, Inc. (the “Company”) on Form 10-Q for the period ended November 1, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kenneth R. Bowling, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
/s/ Kenneth R. Bowling |
Kenneth R. Bowling |
Executive Vice President and Chief Financial Officer |
December 11, 2020
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906 has been provided to Culp, Inc. and will be retained by Culp, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Nov. 01, 2020 |
Nov. 03, 2019 |
Nov. 01, 2020 |
Nov. 03, 2019 |
|
Consolidated Statements of Comprehensive Income (Loss) | ||||
Net (loss) income | $ 2,384 | $ 2,192 | $ (349) | $ 3,366 |
Unrealized holding (losses) gains on investments, net of tax | (39) | 9 | 30 | 15 |
Reclassification adjustment for realized loss on investments | 6 | 6 | ||
Comprehensive (loss) income | 2,351 | 2,201 | (313) | 3,381 |
Plus: Comprehensive loss attributable to noncontrolling interest associated with discontinued operation | 108 | 272 | ||
Comprehensive (loss) income attributable to Culp, Inc. common shareholders | $ 2,351 | $ 2,309 | $ (313) | $ 3,653 |
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares |
Nov. 01, 2020 |
May 03, 2020 |
Nov. 03, 2019 |
---|---|---|---|
Statement Of Financial Position [Abstract] | |||
Preferred stock, par value | $ 0.05 | $ 0.05 | $ 0.05 |
Preferred stock, authorized shares | 10,000,000 | 10,000,000 | 10,000,000 |
Common stock, par value | $ 0.05 | $ 0.05 | $ 0.05 |
Common stock, authorized shares | 40,000,000 | 40,000,000 | 40,000,000 |
Common stock, issued | 12,303,023 | 12,284,946 | 12,411,957 |
Common stock, outstanding | 12,303,023 | 12,284,946 | 12,411,957 |
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands |
6 Months Ended | |||
---|---|---|---|---|
Nov. 01, 2020 |
Nov. 03, 2019 |
|||
Cash flows from operating activities: | ||||
Net (loss) income | $ (349) | $ 3,366 | ||
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | ||||
Depreciation | 3,538 | 3,893 | ||
Amortization | 235 | 353 | ||
Stock-based compensation | 474 | 467 | ||
Deferred income taxes | 4,419 | 53 | ||
Gain on disposal of equipment | (93) | |||
Realized loss on short-term investments available for sale | 6 | |||
(Income) loss from investment in unconsolidated joint venture | (167) | 3 | ||
Foreign currency exchange loss (gain) | 723 | (106) | ||
Changes in assets and liabilities: | ||||
Accounts receivable | (7,663) | (835) | ||
Inventories | 602 | (4,797) | ||
Other current assets | (1,175) | (31) | ||
Other assets | (40) | 133 | ||
Accounts payable – trade | 14,156 | 3,564 | ||
Deferred revenue | (127) | (24) | ||
Accrued expenses and deferred compensation | 6,019 | 1,620 | ||
Accrued restructuring costs | (89) | |||
Income taxes | 2,052 | 770 | ||
Net cash provided by operating activities | 22,703 | 8,247 | ||
Cash flows from investing activities: | ||||
Capital expenditures | (2,041) | (2,410) | ||
Proceeds from the sale of equipment | 12 | 363 | ||
Investment in unconsolidated joint venture | (90) | |||
Proceeds from the maturity of short-term investments (Held to Maturity) | 1,800 | 5,000 | ||
Purchase of short-term and long-term investments (Held to Maturity) | (1,245) | |||
Purchase of short-term investments (Available for Sale) | (5,010) | |||
Proceeds from the sale of short-term investments (Available for Sale) | 455 | |||
Proceeds from the sale of long-term investments (rabbi trust) | 77 | |||
Purchase of long-term investments (rabbi trust) | (257) | (479) | ||
Net cash (used in) provided by investing activities | (6,299) | 2,474 | ||
Cash flows from financing activities: | ||||
Payments associated with lines of credit | (30,772) | |||
Payments associated with Paycheck Protection Program Loan | (7,606) | |||
Dividends paid | (2,583) | (2,482) | ||
Cash paid for acquisition of business | (1,532) | |||
Proceeds from subordinated loan payable associated with the noncontrolling interest of discontinued operation | 250 | |||
Capital contribution from noncontrolling interest associated with discontinued operation | 360 | |||
Common stock surrendered for withholding taxes payable | (25) | (51) | ||
Payments of debt issuance costs | (15) | |||
Net cash used in financing activities | (41,001) | (3,455) | ||
Effect of exchange rate changes on cash and cash equivalents | 95 | (91) | ||
(Decrease) increase in cash and cash equivalents | (24,502) | 7,175 | ||
Cash and cash equivalents at beginning of period | 69,790 | 40,008 | ||
Cash and cash equivalents at end of period | [1] | $ 45,288 | $ 47,183 | |
|
CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) $ in Thousands |
Nov. 03, 2019
USD ($)
|
---|---|
Cash and cash equivalents | $ 47,200 |
Cash and Cash Equivalents [Member] | |
Cash and cash equivalents | 47,000 |
Current Assets Discontinued Operation [Member] | |
Cash and cash equivalents | $ 228,000 |
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - USD ($) $ in Thousands |
Total |
Common Stock |
Capital Contributed in Excess of Par Value |
Accumulated Earnings |
Accumulated Other Comprehensive (Loss) Income |
Shareholders' equity attributable to Culp Inc. |
Noncontrolling Interest Discontinued Operation |
||
---|---|---|---|---|---|---|---|---|---|
Balance at Apr. 28, 2019 | [1] | $ 164,247 | $ 620 | $ 43,694 | $ 115,579 | $ 40 | $ 159,933 | $ 4,314 | |
Balance (in shares) at Apr. 28, 2019 | [1] | 12,391,160 | |||||||
Net income (loss) | 1,174 | 1,338 | 1,338 | (164) | |||||
Stock-based compensation | 154 | 154 | 154 | ||||||
Unrealized gain (loss) on investments | 6 | 6 | 6 | ||||||
Common stock issued in connection with vesting of performance based restricted stock units | $ 1 | (1) | |||||||
Common stock issued in connection with vesting of performance based restricted stock units (in shares) | 12,776 | ||||||||
Fully vested common stock award, (in shares) | 3,659 | ||||||||
Common stock surrendered for withholding taxes payable | (44) | (44) | (44) | ||||||
Common stock surrendered for withholding taxes payable (in shares) | (2,581) | ||||||||
Dividends paid | (1,241) | (1,241) | (1,241) | ||||||
Capital contribution from non-controlling interest associated with discontinued operation | 40 | 40 | |||||||
Balance at Aug. 04, 2019 | 164,336 | $ 621 | 43,803 | 115,676 | 46 | 160,146 | 4,190 | ||
Balance (in shares) at Aug. 04, 2019 | 12,405,014 | ||||||||
Balance at Apr. 28, 2019 | [1] | 164,247 | $ 620 | 43,694 | 115,579 | 40 | 159,933 | 4,314 | |
Balance (in shares) at Apr. 28, 2019 | [1] | 12,391,160 | |||||||
Net income (loss) | 3,366 | ||||||||
Balance at Nov. 03, 2019 | 165,922 | $ 621 | 44,109 | 116,735 | 55 | 161,520 | 4,402 | ||
Balance (in shares) at Nov. 03, 2019 | 12,411,957 | ||||||||
Balance at Aug. 04, 2019 | 164,336 | $ 621 | 43,803 | 115,676 | 46 | 160,146 | 4,190 | ||
Balance (in shares) at Aug. 04, 2019 | 12,405,014 | ||||||||
Net income (loss) | 2,192 | 2,300 | 2,300 | (108) | |||||
Stock-based compensation | 313 | 313 | 313 | ||||||
Unrealized gain (loss) on investments | 9 | 9 | 9 | ||||||
Common stock issued in connection with vesting of performance based restricted stock units (in shares) | 2,862 | ||||||||
Fully vested common stock award, (in shares) | 4,520 | ||||||||
Common stock surrendered for withholding taxes payable | (7) | (7) | (7) | ||||||
Common stock surrendered for withholding taxes payable (in shares) | (439) | ||||||||
Dividends paid | (1,241) | (1,241) | (1,241) | ||||||
Capital contribution from non-controlling interest associated with discontinued operation | 320 | 320 | |||||||
Balance at Nov. 03, 2019 | 165,922 | $ 621 | 44,109 | 116,735 | 55 | $ 161,520 | $ 4,402 | ||
Balance (in shares) at Nov. 03, 2019 | 12,411,957 | ||||||||
Balance at May. 03, 2020 | [1] | 129,698 | $ 615 | 42,582 | 86,511 | (10) | |||
Balance (in shares) at May. 03, 2020 | [1] | 12,284,946 | |||||||
Net income (loss) | (2,733) | (2,733) | |||||||
Stock-based compensation | 126 | 126 | |||||||
Unrealized gain (loss) on investments | 69 | 69 | |||||||
Fully vested common stock award, (in shares) | 7,000 | ||||||||
Dividends paid | (1,291) | (1,291) | |||||||
Balance at Aug. 02, 2020 | 125,869 | $ 615 | 42,708 | 82,487 | 59 | ||||
Balance (in shares) at Aug. 02, 2020 | 12,291,946 | ||||||||
Balance at May. 03, 2020 | [1] | 129,698 | $ 615 | 42,582 | 86,511 | (10) | |||
Balance (in shares) at May. 03, 2020 | [1] | 12,284,946 | |||||||
Net income (loss) | (349) | ||||||||
Balance at Nov. 01, 2020 | 127,251 | $ 615 | 43,031 | 83,579 | 26 | ||||
Balance (in shares) at Nov. 01, 2020 | 12,303,023 | ||||||||
Balance at Aug. 02, 2020 | 125,869 | $ 615 | 42,708 | 82,487 | 59 | ||||
Balance (in shares) at Aug. 02, 2020 | 12,291,946 | ||||||||
Net income (loss) | 2,384 | 2,384 | |||||||
Stock-based compensation | 348 | 348 | |||||||
Unrealized gain (loss) on investments | (33) | (33) | |||||||
Common stock issued in connection with vesting of performance based restricted stock units (in shares) | 8,019 | ||||||||
Fully vested common stock award, (in shares) | 5,193 | ||||||||
Common stock surrendered for withholding taxes payable | (25) | (25) | |||||||
Common stock surrendered for withholding taxes payable (in shares) | (2,135) | ||||||||
Dividends paid | (1,292) | (1,292) | |||||||
Balance at Nov. 01, 2020 | $ 127,251 | $ 615 | $ 43,031 | $ 83,579 | $ 26 | ||||
Balance (in shares) at Nov. 01, 2020 | 12,303,023 | ||||||||
|
Basis of Presentation |
6 Months Ended |
---|---|
Nov. 01, 2020 | |
Organization Consolidation And Presentation Of Financial Statements [Abstract] | |
Basis of Presentation |
1. Basis of Presentation The accompanying unaudited condensed consolidated financial statements of Culp, Inc. and its majority-owned subsidiaries (the “company”) include all adjustments, which are, in the opinion of management, necessary for fair presentation of the results of operations and financial position. All of these adjustments are of a normal recurring nature. Results of operations for interim periods may not be indicative of future results. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements, which are included in the company’s annual report on Form 10-K filed with the Securities and Exchange Commission on July 17, 2020, for the fiscal year ended May 3, 2020. The company’s six-months ended November 1, 2020, and November 3, 2019, represent 26-week and 27-week periods, respectively. |
Significant Accounting Policies |
6 Months Ended |
---|---|
Nov. 01, 2020 | |
Accounting Policies [Abstract] | |
Significant Accounting Policies |
2. Significant Accounting Policies As of November 1, 2020, there were no changes in the nature of our significant accounting policies or the application of those policies from those reported in our annual report on Form 10-K for the year then ended May 3, 2020. Recently Adopted Accounting Pronouncements Current Expected Credit Losses (“CECL”) In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which requires entities to use a forward looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables. The FASB has subsequently issued updates to the standard to provide additional clarification on specific topics. Topic 326 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. As a result, we adopted the provisions of Topic 326 on May 4, 2020 and applied this guidance through the second quarter of fiscal 2021. The adoption of Topic 326 did not have an impact on our financial position, results of operations, or cash flows. See Notes 4 and 11 of our consolidated financial statements for further details of the adoption of CECL as of May 4, 2020 and our assessments and conclusions as of November 1, 2020. Recently Issued Accounting Pronouncements Income Taxes In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. We are required to apply this guidance in our fiscal 2022 interim and annual financial statements. Currently we do not expect this standard to affect our consolidated financial statements and related disclosures. There are no other new recent accounting pronouncements that are expected to have a material impact on our consolidated financial statements. |
Home Accessories Segment – Discontinued Operation |
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Discontinued Operations And Disposal Groups [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Home Accessories Segment – Discontinued Operation |
Overview On March 31, 2020, we sold our entire ownership interest in eLuxury, LLC (“eLuxury”) to eLuxury’s noncontrolling interest holder in consideration of an accelerated settlement of certain financial obligations due and payable by eLuxury to us and the entry into supply and royalty arrangements designed to preserve an additional sales channel for our core products. Also, this sale, which was part of our comprehensive response to the challenging business conditions arising from the COVID-19 global pandemic, has allowed us to focus on our core businesses of upholstery and mattress fabrics and has been a factor in the increase of our liquidity through the first half of fiscal 2021. In connection with the sale of our entire ownership interest in eLuxury, (i) we received $509,500 at closing as an accelerated repayment of principal amounts previously loaned to eLuxury, together with outstanding interest, under a loan agreement between us and eLuxury; (ii) we forgave $300,000 of borrowings payable by eLuxury to us under this loan agreement; (iii) we entered into an amended and restated credit and security agreement with eLuxury and the buyer (the former noncontrolling interest holder) (together, the “Borrowers”), pursuant to which the Borrowers agreed to repay an additional $1 million previously loaned to eLuxury within thirty days of the closing of the sale transaction (and which amount was secured by the assets of both Borrowers); and (iv) eLuxury agreed to pay $613,000 within sixty days of the sale transaction in satisfaction of certain trade accounts payable due from eLuxury to us.
The remaining $1 million we previously loaned to eLuxury and the outstanding trade accounts payable balance of $613,000 due from eLuxury to us has been paid in full in accordance with the terms of the sale agreement outlined above.
Discontinued Operation Financial Statement Presentation and Disclosures
Financial Statement Presentation
Due to the sale of our entire ownership interest in eLuxury, our home accessories segment was eliminated. Consequently, we determined that the results from operations and assets and liabilities associated with our home accessories segment were to be excluded from our continuing operations and presented as a discontinued operation in our consolidated financial statements in accordance with ASC Topic 205-20-45. As a result, we classified the results from operations of our home accessories segment separately in captions titled “Discontinued Operation” on our Consolidated Statement of Net Income for the three-month and six-month periods ending November 3, 2019. Additionally, assets and liabilities associated with our home accessories segment as of November 3, 2019, were reclassified from certain amounts reported in the prior period to present separately in captions titled “current assets – discontinued operation”, “noncurrent assets – discontinued operation”, “current liabilities - discontinued operation”, and “noncurrent liabilities – discontinued operation” to conform to current year financial statement presentation.
Consolidated Balance Sheet
The following is a summary of the assets and liabilities of the disposal group that are presented separately as a discontinued operation on the Consolidated Balance Sheet as of November 3, 2019.
Net Loss from Discontinued Operation
The following is a summary of the major classes of financial statement line items constituting loss before income taxes from discontinued operation that are presented in the Consolidated Statements of Net Income for the three-month and six-month periods ending November 3, 2019:
The following is a summary of net income (loss) from continuing operations, net loss from discontinued operation, and net income (loss) attributable to Culp, Inc. common shareholders and the noncontrolling interest associated with our discontinued operation for the three-month and six-month periods ending November 1, 2020, and November 3, 2019:
Cash Flow Disclosures Our discontinued operation had net cash used in operating activities totaling $2.2 million during the six-months ending November 3, 2019. Our discontinued operation had net cash used in investing activities totaling $32,000 during the six-months ending November 3, 2019. Our discontinued operation had net cash provided by financing activities, all of which were loan proceeds and capital contributions from Culp, Inc. and the former noncontrolling interest holder of eLuxury, totaling $2.4 million during the six-months ending November 3, 2019. We believe our liquidity has improved during the first half of fiscal 2021 in the absence of our former home accessories segment due to the significant losses that were incurred by that segment and the funding of its working capital requirements primarily by us through loans and capital contributions that are no longer required. Continuing Obligations, Financial Commitments, and Continuing Relationships with the Discontinued Operation Supply and Royalty Agreements In connection with the sale of our entire ownership interest in eLuxury, we entered into supply and royalty agreements with eLuxury to preserve an additional sales channel for our core products – upholstery and mattress fabrics. The supply agreement requires eLuxury to purchase all its requirements at fair market prices for mattress and upholstery fabric products of the type we were supplying to eLuxury at the time of the sale transaction, as well as certain home accessories and soft good products, subject to our ability to provide competitive pricing and delivery terms for such products. The royalty agreement requires eLuxury to pay us a royalty fee based on a percentage of sales, as defined in the royalty agreement, for sales of eLuxury’s products to certain business-to-business customers, including customers which we referred to eLuxury prior to the sale transaction and new customer relationships we develop for eLuxury going forward, as well as sales of eLuxury products generated by sales representatives that we develop or introduce to eLuxury. There are no guarantees or provisions under either the supply or royalty agreements that require eLuxury to purchase a minimum amount of our products or sell a certain amount of eLuxury products to customers or through sales representatives developed or introduced by us. As a result, the success of these agreements and the period of time in which our involvement with eLuxury is expected to continue are based on eLuxury’s ability to sell products that require mattress and upholstery fabrics and our ability to provide an additional sales channel for eLuxury to grow its business-to-business sales platform. As a result of our continuing involvement with eLuxury, we reported net sales and the related cost of sales associated with our inventory shipments to eLuxury in accordance with Topic 205-20-50-4B, which requires us to report these transactions in continuing operations in our Consolidated Statement of Net Income for the three-month and six-month periods ending November 3, 2019. Therefore, we reported both net sales and cost of sales from continuing operations totaling $207,000 and $381,000 during the three-month and six-month periods ending November 3, 2019, respectively, that were previously eliminated in consolidation. During the three-month and six-month periods ending November 1, 2020, shipments to eLuxury under the supply agreement totaled $41,000 and $285,000, respectively. During the three-month and six-month periods ending November 1, 2020, we received payments pursuant to the royalty agreement totaling $28,000 and $80,000, respectively. Financial Guarantee Currently, we have an agreement that guarantees 70% of any unpaid lease payments associated with eLuxury’s facility located in Evansville, Indiana. The lease agreement expires in September 2024 and requires monthly payments of $18,865. Under the terms of the sale of our controlling interest in eLuxury, the buyer (the former noncontrolling interest holder) must use commercially reasonable efforts to cause the lessor to release us from this financial guarantee of eLuxury’s lease agreement. Following the sale transaction, eLuxury and its sole owner have indemnified us from any liabilities and obligations that we would be required to pay regarding this lease agreement.
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Allowance for Doubtful Accounts |
4. Allowance for Doubtful Accounts A summary of the activity in the allowance for doubtful accounts follows:
During the six-month period ended November 1, 2020, we assessed the credit risk of our customers within our accounts receivable portfolio. Our risk assessment includes the respective customer’s (i) financial position; (ii) past payment history; (iii) management’s general ability; (iv) historical loss experience; and (v) the ongoing economic uncertainty associated with the COVID-19 global pandemic. After our risk assessment was completed, we assigned credit grades to our customers, which in turn, were used to determine our allowance for doubtful accounts totaling $595,000 as of November 1, 2020. |
Revenue from Contracts with Customers |
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Revenue from Contracts with Customers |
5. Revenue from Contracts with Customers Nature of Performance Obligations Continuing Operations Our continuing operations are classified into two business segments: mattress fabrics and upholstery fabrics. The mattress fabrics segment manufactures, sources, and sells fabrics and mattress covers primarily to bedding manufacturers. The upholstery fabrics segment develops, manufactures, sources, and sells fabrics primarily to residential and commercial furniture manufacturers. Additionally, Read Window Products LLC (“Read”), a wholly-owned subsidiary, is a turn-key provider of window treatments and sourcing of upholstery fabrics and other products, as well as measuring and installation services of Read’s products for the hospitality and commercial industries. Read also supplies soft goods such as decorative top sheets, coverlets, duvet covers, bed skirts, bolsters, and pillows. Read is included in the upholstery fabrics segment. Our primary performance obligations include the sale of mattress fabrics and upholstery fabrics, as well as the performance of customized fabrication and installation services of Read’s own products associated with window treatments. Discontinued Operation – Home Accessories Segment As disclosed in Note 3 of the consolidated financial statements, we sold our entire ownership interest in eLuxury on March 31, 2020, and consequently our home accessories segment was eliminated at such time. Thus, the results of operations associated with our home accessories segment were excluded from our continuing operations and are presented as a discontinued operation in our consolidated financial statements. The home accessories segment was our finished products business that manufactured, sourced, and sold bedding accessories and home goods directly to consumers and businesses through global e-commerce, business-to-business, and other sales channels. Prior to its disposal, our former home accessories segment reported net sales totaling $3.3 million and $7.6 million for the three-month and six-month periods ended November 3, 2019, respectively. Revenue associated with the sales of home accessories products was recognized at the point-in-time when control was transferred to the customer. Contract Assets & Liabilities Certain contracts, primarily those for customized fabrication and installation services associated with Read, require upfront customer deposits that result in a contract liability which is recorded on the Consolidated Balance Sheets as deferred revenue. If upfront deposits or prepayments are not required, customers may be granted credit terms which generally range from 15 – 60 days. For a limited time, extended terms were granted to certain customers in response to the challenging business conditions resulting from the COVID-19 global pandemic. Our customary terms, as well as the limited extended terms, are common within the industries in which we operate and are not considered financing arrangements. There were no contract assets recognized as of November 1, 2020, November 3, 2019, and May 3, 2020. A summary of the activity associated with deferred revenue for the six-month periods ended November 1, 2020, and November 3, 2019, follows:
Disaggregation of Revenue The following table presents our disaggregated revenue by segment, timing of revenue recognition, and product sales versus services rendered for the three-month period ending November 1, 2020:
The following table presents our disaggregated revenue by segment, timing of revenue recognition, and product sales versus services rendered for the six-month period ending November 1, 2020:
The following table presents our disaggregated revenue by segment, timing of revenue recognition, and product sales versus services rendered for the three-month period ending November 3, 2019:
The following table presents our disaggregated revenue by segment, timing of revenue recognition, and product sales versus services rendered for the six-month period ending November 3, 2019:
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Inventories |
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Inventories |
6. Inventories Inventories are carried at the lower of cost or net realizable value. Cost is determined using the FIFO (first-in, first-out) method. A summary of inventories follows:
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Intangible Assets |
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Goodwill And Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible Assets |
7. Intangible Assets A summary of intangible assets follows:
Tradenames Our tradename totaling $540,000 as of November 1, 2020, pertained to Read, a separate reporting unit within the upholstery fabrics segment. This tradename was determined to have an indefinite useful life at the time of its acquisition, and therefore, is not being amortized. However, we are required to assess this tradename annually or between annual tests if we believe indicators of impairment exist. Based on our assessment as of November 1, 2020, no indicators of impairment existed. However, during our annual assessment as of May 3, 2020, we performed a qualitative assessment in which we concluded that it was more-likely-than-not that the fair value of Read’s tradename was less than its carrying amount. This conclusion was based on impairment indicators that existed, such as our unfavorable financial performance during the fourth quarter of fiscal 2020 and the significant decline in the price per share of our common stock and market capitalization stemming from the COVID-19 global pandemic. Since we determined it was more-likely-than-not that the fair market value of Read’s tradename was less than its carrying amount, we performed a quantitative impairment test. Our quantitative impairment test involved determining the fair value of Read’s tradename and comparing the respective fair value of Read’s tradename with its carrying amount. Consequently, based on our quantitative impairment test, we recorded an asset impairment charge totaling $143,000 during the fourth quarter of fiscal 2020. As a result of our quantitative impairment test, we determined the fair value of our tradename was $540,000 using the relief from royalty method. This method used significant unobservable inputs and therefore, the fair value of our tradename was classified as level 3 within the fair value hierarchy. Refer to Note 11 of the consolidated financial statements for further information about our determination to classify this tradename as level 3 within the fair value hierarchy in accordance with Topic 820. Customer Relationships A summary of the change in the carrying amount of our customer relationships follows:
Our customer relationships are amortized on a straight-line basis over useful lives ranging from nine to seventeen years. The gross carrying amount of our customer relationships was $3.1 million as of November 1, 2020, November 3, 2019, and May 3, 2020, respectively. Accumulated amortization for these customer relationships was $1.0 million, $727,000, and $877,000 as of November 1, 2020, November 3, 2019, and May 3, 2020, respectively. The remaining amortization expense for the next five fiscal years and thereafter follows: FY 2021 - $151,000; FY 2022 - $301,000; FY 2023 - $301,000; FY 2024 - $301,000; FY 2025 - $301,000; and thereafter - $732,000. The weighted average amortization period for our customer relationships is 7.1 years as of November 1, 2020. Non-Compete Agreement A summary of the change in the carrying amount of our non-compete agreement follows:
Our non-compete agreement is amortized on a straight-line basis over the life of the agreement.The gross carrying amount of our non-compete agreement was $2.0 million as of November 1, 2020, November 3, 2019, and May 3, 2020, respectively. Accumulated amortization for our non-compete agreement was $1.5 million as of November 1, 2020, $1.4 million as of November 3, 2019, and $1.4 million as of May 3, 2020. The remaining amortization expense for the next five years and thereafter follows: FY 2021 - $37,000; FY 2022 - $76,000; FY 2023 - $76,000; FY 2024 - $76,000; FY 2025 - $76,000, and thereafter - $224,000. The weighted average amortization period for the non-compete agreement is 7.5 years as of November 1, 2020. |
Investment in Unconsolidated Joint Venture |
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Investment in Unconsolidated Joint Venture |
8. Investment in Unconsolidated Joint Venture Culp International Holdings, Ltd. (“Culp International”), a wholly-owned subsidiary of the company, entered into a joint venture agreement pursuant to which Culp International owns fifty percent of Class International Holdings, Ltd. (“CLIH”). CLIH produces cut and sewn mattress covers in an 80,000 square foot facility located in a modern industrial park on the northeastern border of Haiti, which borders the Dominican Republic. CLIH complements our mattress fabric operations with a reactive platform that enhances our ability to meet customer demand while adding a lower cost operation to our platform. On December 20, 2019, CLIH entered into an agreement to construct an additional plant facility totaling 40,000 square feet, which was completed during September 2020. This new plant facility is near our existing operations and provides additional capacity that enhances our ability to produce sewn covers. This agreement requires payments totaling $1.2 million, of which $600,000 was paid in February 2020, $180,000 was paid in May 2020, and $420,000 was paid in September 2020. CLIH reported net income totaling $334,000 for the six-month period ending November 1, 2020, and a net loss of $6,000 for the six-month period ending November 3, 2019. Our equity interest in CLIH’s net income was $167,000 for the six-month period ending November 1, 2020. Our equity interest in CLIH’s net loss was $3,000 for the six-month period ending November 3, 2019. The following table summarizes information on assets, liabilities, and members’ equity of our equity method investment in CLIH:
As of November 1, 2020, November 3, 2019, and May 3, 2020, our investment in CLIH totaled $1.9 million, $1.5 million, and $1.6 million, respectively, which represents the company’s fifty percent ownership interest in CLIH. |
Accrued Expenses |
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Accrued Expenses |
9. Accrued Expenses A summary of accrued expenses follows:
As of November 1, 2020, our entire accrued expenses totaling $11.7 million were classified as current accrued expenses in the accompanying Consolidated Balance Sheets. As of November 3, 2019, we had accrued expenses totaling $9.2 million, of which $8.3 million, $333,000, and $652,000 were classified as (i) current accrued expenses, (ii) long-term accrued expenses, and (iii) within current liabilities – discontinued operation, respectively, in the accompanying Consolidated Balance Sheets. As of May 3, 2020, we had accrued expenses totaling $5.9 million, of which $5.7 million and $167,000 were classified as (i) current accrued expenses and (ii) long-term accrued expenses, respectively, in the accompanying Consolidated Balance Sheets. |
Lines of Credit and Paycheck Protection Program Loan |
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Debt Disclosure [Abstract] | |
Lines of Credit and Paycheck Protection Program Loan |
10. Lines of Credit and Paycheck Protection Program Loan Revolving Credit Agreement – United States Our Credit Agreement (“Credit Agreement”) with Wells Fargo Bank, N.A. (“Wells Fargo”) provides a revolving loan commitment of $30 million, is set to expire on August 15, 2022, and allows us to issue letters of credit not to exceed $1 million. Interest is charged at a rate (applicable interest rate of 1.74%, 3.22%, and 1.75% as of November 1, 2020, November 3, 2019, and May 3, 2020, respectively) as a variable spread over LIBOR based on our ratio of debt to EBITDA. Outstanding borrowings are secured by a pledge of 65% of the common stock of Culp International Holdings Ltd. (our subsidiary located in the Cayman Islands). As a result of the COVID-19 global pandemic and the uncertainty relating to the unknown duration and overall effect on the company, we proactively took a precautionary measure and borrowed the maximum amount available from this line of credit during the fourth quarter of fiscal 2020. Consequently, we had outstanding borrowings of $29.8 million under the Credit Agreement as of May 3, 2020. During June 2020, we repaid the entire $29.8 million outstanding balance and there were no additional borrowings made during the first half of fiscal 2021. As a result, there were no borrowings outstanding under the Credit Agreement as of November 1, 2020. Additionally, there were no borrowings outstanding under the Credit Agreement as of November 3, 2019. As of November 1, 2020, November 3, 2019, and May 3, 2020, there were $250,000 in outstanding letters of credit (all of which related to workers compensation) provided by the Credit Agreement. As of November 1, 2020, we had $750,000 remaining for the issuance of additional letters of credit. Seventh Amendment to the Credit Agreement Effective June 30, 2020, we entered into a Seventh Amendment to our Credit Agreement (the “Seventh Amendment”) which includes provisions that (i) modify the method for calculating the company’s debt to EBITDA covenant under the Credit Agreement solely during the temporary period beginning on the date of the Seventh Amendment and ending on the Rate Determination Date (as defined in the Credit Agreement), following the end of the company’s fiscal 2021 fourth quarter (such temporary period, the “Modification Period,”), and (ii) amend the pricing matrix used to determine the interest rate payable on loans made under the Credit Agreement solely during the Modification Period. Specifically, the Seventh Amendment provides that during Modification Period, the company’s ratio of debt to EBITDA shall be determined by excluding the fourth quarter of fiscal 2020 from the calculation thereof, such that the ratio shall be determined using the four most recent quarterly periods other than (i.e. excluding) the fourth quarter of fiscal 2020, rather than calculating on a rolling four-quarter basis. It further provides that during the Modification Period, the Applicable Margin (as defined in the Credit Agreement) set forth the pricing matrix is increased to 1.6% for price level I, 2.05% for price level II, 2.5% for price level III, and 3.0% for price level IV. Additionally, the Seventh Amendment (i) changes the capital expenditure covenant by reducing permitted annual capital expenditures to $10 million during fiscal year 2021, (ii) changes the liens and other indebtedness covenant to reduce the permitted amount of allowable liens and other indebtedness to 5% of consolidated net worth, and (iii) adds a new covenant that prohibits the company, solely during the Modification Period, from paying dividends or repurchasing stock in excess of $10 million in the aggregate during the Modification Period. Revolving Credit Agreements – China Operations Denominated in Chinese Yuan Renminbi (“RMB”) We have an unsecured credit agreement denominated in Chinese Renminbi with a bank located in China that provides for a line of credit up to 40 million RMB’s ($6.0 million USD as of November 1, 2020). This agreement has an interest rate determined by the Chinese government at the time of borrowing and was set to expire on December 4, 2020. As of May 3, 2020, there were outstanding borrowings under this agreement totaling $1.0 million at an applicable interest rate of 2.41%. During June 2020, we repaid the entire $1.0 million and there were no additional borrowings made during the first half of fiscal 2021. As a result, there were no borrowing outstanding under this agreement as of November 1, 2020. Additionally, there were no borrowing outstanding under this agreement as of November 3, 2019. On December 1, 2020, we renewed this agreement to extend the expiration date to December 1, 2021, and maintain our borrowing capacity of 40 million RMB’s. Denominated in United States Dollar (“USD”) We have an unsecured credit agreement denominated in USD with another bank located in China that provides for a line of credit up to $2 million USD. This agreement has an interest rate determined by the Chinese government at the time of borrowing and is set to expire on July 7, 2021. As of November 1, 2020, there are no borrowings outstanding under this agreement. Small Business Administration - Paycheck Protection Program On April 15, 2020, we received a loan of $7.6 million (the “Loan”) pursuant to the U.S. Small Business Administration (the “SBA”) Paycheck Protection Program (the “PPP”) of the Coronavirus Aid, Relief and Economic Security Act of 2020 (the “CARES Act”). We planned to use the proceeds from the Loan for covered payroll costs, rent, and utilities in accordance with the applicable terms and conditions of the CARES Act. We believed the Loan would enable us to retain more of our employees, maintain payroll and benefits, and make lease and utility payments while producing and supplying critical products for essential businesses during the COVID-19 global pandemic. Following our application and receipt of the Loan, the SBA and U.S. Treasury Department issued new guidance regarding eligibility requirements under the PPP, raising questions regarding the eligibility of publicly traded companies to receive loans under the program. As a result, out of an abundance of caution, we voluntarily repaid the Loan in full on May 13, 2020. Overall Our loan agreements require, among other things, that we maintain compliance with certain financial covenants. As of November 1, 2020, we were in compliance with these financial covenants. |
Fair Value |
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Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value |
11. Fair Value ASC Topic 820 establishes a fair value hierarchy that distinguishes between assumptions based on market data (observable inputs) and the company’s assumptions (unobservable inputs). Determining where an asset or liability falls within that hierarchy depends on the lowest level input that is significant to the fair value measurement as a whole. An adjustment to the pricing method used within either level 1 or level 2 inputs could generate a fair value measurement that effectively falls in a lower level in the hierarchy. The hierarchy consists of three broad levels as follows: Level 1 – Quoted market prices in active markets for identical assets or liabilities. Level 2 – Inputs other than level 1 inputs that are either directly or indirectly observable. Level 3 – Unobservable inputs developed using the company’s estimates and assumptions, which reflect those that market participants would use. The determination of where an asset or liability falls in the hierarchy requires significant judgment. We evaluate our hierarchy disclosures each quarter based on various factors and it is possible that an asset or liability may be classified differently from quarter to quarter. However, we expect that changes in classifications between different levels will be rare. Recurring Basis The following table presents information about assets measured at fair value on a recurring basis:
Short-Term Investments – Available for Sale Our short-term investments classified as available for sale consisted of short-term bond mutual funds and had an accumulated unrealized loss totaling $29,000 as of November 1, 2020, and $9,000 as of May 3, 2020. Our short-term investments classified as available for sale were recorded at their fair values of $5.5 million and $923,000 as of November 1, 2020, and May 3, 2020, respectively. As of November 1, 2020, and May 3, 2020, the fair value of our short-term investments approximated their cost basis. There were no short-term investments classified as available for sale as of November 3, 2019. Short-Term and Long-Term Investments - Held-To-Maturity Our investments classified as held-to-maturity consisted of investment grade U.S. corporate bonds, foreign bonds, and government bonds with original maturities that range from 2 to 10 years, all of which have remaining maturities of less than 2 years as of November 1, 2020. These investments were classified as held-to-maturity as we have the positive intent and ability to hold these investments until maturity. Our held-to-maturity investments were recorded as either current or noncurrent on our Consolidated Balance Sheets, based on the maturity date in relation to the respective reporting period, and were recorded at amortized cost. As of November 1, 2020, and May 3, 2020, our held-to-maturity investments recorded at amortized cost totaled $5.8 million and $6.3 million, respectively. The fair value of our held-to-maturity investments as of November 1, 2020, and May 3, 2020, totaled $5.8 million and $6.4 million, respectively. There were no investments classified as held-to-maturity on November 3, 2019. Our bond investments were classified as level 2 as they were traded over the counter within a broker network and not on an active market. The fair value of our bond investments was determined based on a published source that provided an average bid price. The average bid price was based on various broker prices that were determined based on market conditions, interest rates, and the rating of the respective bond investment. Current Expected Credit Loses (“CECL”)- Available for Sale and Held-To-Maturity Investments As of May 4, 2020, we did not have an allowance for credit losses related to our short-term available for sale and held-to-maturity investments, which are comprised mostly of fixed income securities that are predominantly high-grade U.S. and foreign corporate bonds, U.S. Treasury bonds, and short-term mutual bond funds. As a result of our adoption of Topic 326 effective May 4, 2020, we determined that our credit loss exposure was immaterial due to the short-term nature of our mutual bond funds, and we have experienced historically low unrealized losses and gains during past reporting periods. In addition, it is not our intention to sell, and it is not likely that we will be required to sell, our held-to-maturity investments before the recovery of their amortized cost basis. As of November 1, 2020, we reported an accumulated unrealized loss of $29,000 associated with our short-term investments classified as available for sale. As mentioned above, it is not our intention to sell nor is it likely that we will be required to sell, our held-to-maturity investments before the recovery of their amortized cost basis. Accordingly, we did not record any credit loss expense during the six-month period ending November 1, 2020. Long-Term Investments - Rabbi Trust We have a rabbi trust to set aside funds for participants of our deferred compensation plan (the “Plan”), which enables its participants to credit their contributions to various investment options of the Plan. The investments associated with the rabbi trust consist of a money market fund and various mutual funds that are classified as available for sale. The long-term investments associated with our rabbi trust were recorded at their fair values of $8.1 million, $7.6 million, and $7.8 million as of November 1, 2020, November 3, 2019, and May 3, 2020, respectively. The long-term investments associated with our rabbi trust had an accumulated unrealized gain of $55,000, $55,000, and $19,000 as of November 1, 2020, and November 3, 2019, and May 3, 2020, respectively. The fair value of our long-term investments associated with our rabbi trust approximates their cost basis. Other The carrying amount of our cash and cash equivalents, accounts receivable, other current assets, accounts payable, and accrued expenses approximates fair value because of the short maturity of these financial instruments.
Nonrecurring Basis – Fourth Quarter Fiscal 2020 Continuing Operations
In accordance with ASC Topic 350 Intangibles – Goodwill and Other, we are required to assess our goodwill and tradename for impairment annually or between annual tests if we believe indicators of impairment exist. Accordingly, we performed our annual assessment of goodwill associated with our mattress fabrics segment and goodwill and tradename affiliated with Read as of May 3, 2020. Based on our qualitative assessment we concluded that impairment indicators existed, such as our unfavorable financial performance during the fourth quarter of fiscal 2020 and the significant decline in the price per share of our common stock and market capitalization stemming from the COVID-19 global pandemic. As a result, we determined it was more-likely-than-not that the goodwill associated with our mattress fabrics segment and the goodwill and tradename affiliated with Read were impaired, and therefore, we conducted quantitative asset impairment tests. Consequently, based on the results of our quantitative asset impairment tests as of May 3, 2020, we recorded an asset impairment charge totaling $13.6 million during our fourth quarter of fiscal 2020 for the entire carrying amount of our goodwill associated with our mattress fabrics segment and Read. Additionally, we recorded an asset impairment charge of $143,000 during the fourth quarter of fiscal 2020 which reduced the carrying amount of Read’s tradename to its fair value of $540,000. Our fair values associated with our goodwill and tradename were determined using a discounted cash flow and the relief from royalty methods, respectively. These methods used significant unobservable inputs, and therefore, the fair values of our goodwill and tradename were classified within level 3 of the fair value hierarchy. Discontinued Operation – Home Accessories Segment During the fourth quarter of fiscal 2020, we recorded asset impairment charges totaling $6.6 million, of which $4.2 million and $2.4 million were for the entire remaining carrying value associated with our former home accessories segment’s tradename and goodwill. These impairment charges were based on the expected selling price of our entire ownership interest in eLuxury in comparison to its carrying amount. As disclosed in Note 3 of the consolidated financial statements, effective March 31, 2020, we sold our entire ownership interest in eLuxury to its noncontrolling interest holder resulting in the elimination of the home accessories segment at such time. Based on the terms of the sale agreement, we did not receive any consideration for eLuxury’s net assets associated with the sale of our entire ownership in eLuxury. We believe the expected selling price represents a significant observable input and therefore, the fair values of our former home accessories segment’s tradename and goodwill were classified within level 2 of the fair value hierarchy. |
Cash Flow Information |
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Cash Flow Information |
12. Cash Flow Information Interest and income taxes paid (refunded) are as follows:
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Net Income (Loss) from Continuing Operations Per Share |
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Net Income (Loss) from Continuing Operations Per Share |
13. Net Income (Loss) from Continuing Operations Per Share Basic net income (loss) from continuing operations per share is computed using the weighted-average number of shares outstanding during the period. Diluted net income (loss) from continuing operations per share uses the weighted-average number of shares outstanding during the period plus the dilutive effect of stock-based compensation calculated using the treasury stock method. Weighted average shares used in the computation of basic and diluted net income (loss) from continuing operations per share are as follows:
During the second quarter of fiscal 2021, 1,101 shares of unvested common stock were not included in the computation of diluted net income from continuing operations per share, as their effect would be antidilutive resulting from the decrease in the price per share of our common stock during the reporting period in relation to the price per share of our common stock as of the respective grant dates of our outstanding stock-based compensation awards.
During the second quarter of fiscal 2020, 6,938 shares of unvested common stock were not included in the computation of diluted net income from continuing operations per share, as their effect would be antidilutive as result of the decrease in the price per share of our common stock during the reporting period in relation to the price per share of our common stock as of the respective grant dates of our outstanding stock-based compensation awards.
During the first half of fiscal 2021, we did not include a total of 38,313 shares of unvested common stock in the computation of diluted net loss from continuing operations per share. Of the total 38,313 shares of unvested common stock, (i) 26,099 shares were antidilutive resulting from the decrease in the price per share of our common stock during the reporting period in relation to the price per share of our common stock as of the respective grant dates of our outstanding stock-based compensation awards and (ii) 12,214 shares were antidilutive as we incurred a net loss during the reporting period.
During the first half of fiscal 2020, 1,407 shares of unvested common stock were not included in the computation of diluted net income from continuing operations per share, as their effect would be antidilutive, as result of the decrease in the price per share of our common stock during the reporting period in relation to the price per share of our common stock as of the respective grant dates of our outstanding stock-based compensation awards.
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Segment Information |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information |
14. Segment Information Overall Continuing Operations Our continuing operations are classified into two business segments: mattress fabrics and upholstery fabrics. Mattress Fabrics The mattress fabrics segment manufactures, sources, and sells fabrics and mattress covers primarily to bedding manufacturers. Upholstery Fabrics The upholstery fabrics segment develops, manufactures, sources, and sells fabrics primarily to residential and commercial furniture manufacturers. Additionally, the segment includes Read, a wholly-owned subsidiary, which is a turn-key provider of window treatments and sourcing of upholstery fabrics and other products, as well as measuring and installation services of Read’s products for the hospitality and commercial industries. Read also supplies soft goods such as decorative top sheets, coverlets, duvet covers, bed skirts, bolsters, and pillows. Discontinued Operation – Home Accessories Segment As disclosed in Note 3 of the consolidated financial statements, we sold our entire ownership interest in eLuxury on March 31, 2020, and consequently our home accessories segment was eliminated at such time. Thus, the results of operations associated with our home accessories segment were excluded from our continuing operations and presented as a discontinued operation in our consolidated financial statements. Our former home accessories segment was our finished products business that manufactured, sourced, and sold bedding accessories and home goods directly to consumers and businesses through global e-commerce, business-to-business, and other sales channels. See Note 3 of the consolidated financial statements for detailed financial information of our former home accessories segment. As disclosed in Note 3, a reconciliation is provided that has detailed balance sheet information as of November 3, 2019, that is reconciled to captions titled “current assets – discontinued operation”, “noncurrent assets – discontinued operation”, current liabilities – discontinued operation”, and “noncurrent liabilities – discontinued operation” presented in the Consolidated Balance Sheet as of November 3, 2019. Also, a reconciliation is provided that pertains to detailed income statement information disclosed in Note 3 and is reconciled to net loss from discontinued operation presented in the Consolidated Statements of Net Income for the three-month and six-month periods ending November 3, 2019. Financial Information We evaluate the operating performance of our current business segments based upon income (loss) from continuing operations before certain unallocated corporate expenses, asset impairments, restructuring credit (expense) and restructuring related charges, and other non-recurring items. Cost of sales for each segment includes costs to develop, manufacture, or source our products, including costs such as raw material and finished goods purchases, direct and indirect labor, overhead, and incoming freight charges. Unallocated corporate expenses primarily represent compensation and benefits for certain executive officers and their staff, all costs associated with being a public company, and other miscellaneous expenses. Segment assets include assets used in the operations of each segment and primarily consist of accounts receivable, inventories, property, plant, and equipment, and right of use assets. The mattress fabrics segment also includes in segment assets its investment in an unconsolidated joint venture. Goodwill and intangible assets are not included in segment assets as these assets are not used by the Chief Operating Decision Maker to evaluate the respective segment’s operating performance, allocate resources to individual segments, or determine executive compensation. Statements of operations for our current operating segments are as follows:
Balance sheet information for our current operating segments follows:
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Income Taxes |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes |
15. Income Taxes Income Tax Expense Total income tax expense (benefit) for the six-month periods ending November 1, 2020, and November 3, 2019, were allocated as follows:
Effective Income Tax Rate We recorded income tax expense of $5.9 million, or 109.5% of income before income taxes from continuing operations, for the six-month period ended November 1, 2020, compared with income tax expense of $4.0 million, or 49.6% of income before income taxes from continuing operations, for the six-month period ended November 3, 2019. Our effective income tax rates associated with our continuing operations for the six-month periods ended November 1, 2020, and November 3, 2019, were based upon the estimated effective income tax rate applicable for the full year after giving effect to any significant items related specifically to interim periods. When calculating the annual estimated effective income tax rate for the six-months ended November 1, 2020, we were subject to a loss limitation rule in accordance with ASC Topic 740-270-30-36(a). This loss limitation rule required the taxable loss associated with our U.S. operations to be excluded from the annual estimated effective income tax rate calculation as it was determined that no tax benefit could be recognized resulting from the full valuation allowance against our U.S. income tax loss carryforward that is expected to originate during the current fiscal year. The effective income tax rate can be affected over the fiscal year by the mix and timing of actual earnings from our U.S. operations and foreign subsidiaries located in China and Canada versus annual projections, as well as changes in foreign currency exchange rates in relation to the U.S. dollar. The following schedule summarizes the principal differences between income tax expense from continuing operations at the U.S. federal income tax rate and the effective income tax rate from continuing operations reflected in the consolidated financial statements for the six-month periods ending November 1, 2020 and November 3, 2019:
U.S. Tax Law Change Effective July 20, 2020, the U.S Treasury Department finalized and enacted previously proposed regulations regarding the GILTI tax provisions of the TCJA. Prior to this enactment, GILTI represented a significant U.S. income tax on our foreign earnings during fiscal 2019 ($2.1 million) and fiscal 2020 ($1.9 million). With the enactment of these final regulations, we are now eligible for an exclusion from GILTI since we meet the provisions for the GILTI High-Tax exception included in the final regulations. In addition, the enactment of the new regulations and our eligibility for the GILTI High-Tax exception are retroactive to the original enactment of the GILTI tax provision, which includes our 2019 and 2020 fiscal years. As a result of the newly enacted regulations, we recorded a non-cash income tax benefit of $3.5 million resulting from the re-establishment of certain U.S. federal net operating loss carryforwards. This $3.5 million income tax benefit was recorded as a discrete event in which its full income tax effects were recorded in the first quarter and the six-month year-to-date period of fiscal 2021.
Valuation Allowance In accordance with ASC Topic 740, we evaluate our deferred income taxes to determine if a valuation allowance is required. ASC Topic 740 requires that companies assess whether a valuation allowance should be established based on the consideration of all available evidence using a “more-likely-than-not” standard, with significant weight being given to evidence that can be objectively verified. Since the company operates in multiple jurisdictions, we assess the need for a valuation allowance on a jurisdiction-by-jurisdiction basis, considering the effects of local tax law. As a result of the U.S. tax law change relating to the GILTI tax provisions of the TCJA, we assessed the need for an additional valuation allowance against our U.S. net deferred income taxes, as GILTI represented a significant source of our U.S. taxable income during fiscal 2019 and 2020 that offset our U.S. pre-tax losses during such years, and which offset is now reversed as a result of the retroactivity of the new regulations. Consequently, due to the retroactivity of the new regulations, we experienced a recent history of cumulative U.S. taxable losses during our last two fiscal years and we currently expect our history of U.S. pre-tax losses to continue into fiscal 2021, as a result of the continuing economic uncertainty associated with the COVID-19 global pandemic. As a result of the significant weight of this negative evidence, we believe it is more-likely-than-not that our U.S. net deferred income tax assets will not be fully realizable. Accordingly, we recorded a non-cash income tax charge of $7.0 million to provide for a full valuation allowance against our U.S. net deferred income tax assets. This $7.0 million income tax charge was recorded as a discrete event in which its full income tax effects were recorded during the first quarter and the six-month year-to-date period of fiscal 2021. Additionally, we recorded a $713,000 income tax charge to provide for a full valuation allowance against a U.S. income tax loss carryforward that originated during the first half of fiscal 2021. Based on our assessments as of November 1, 2020, November 1, 2019, and May 3, 2020, valuation allowances against our net deferred income taxes pertain to the following:
Undistributed Earnings In accordance with ASC Topic 740, we assess whether the undistributed earnings from our foreign subsidiaries will be reinvested indefinitely or eventually distributed to our U.S. parent company. As of November 1, 2020, we assessed the liquidity requirements of our U.S. parent company and determined that our undistributed earnings from our foreign subsidiaries would not be reinvested indefinitely and would be eventually distributed to our U.S. parent company. The conclusion reached from our assessment has been consistent with prior years. ASC Topic 740 requires that a deferred income tax liability should be recorded for undistributed earnings from foreign subsidiaries that will not be reinvested indefinitely, and as a result we recorded a deferred income tax liability associated with undistributed earnings from our foreign subsidiaries. Also, we assess the recognition of U.S. foreign income tax credits associated with foreign withholding and income tax payments and whether it is more-likely-than-not that our foreign income tax credits will not be realized. If it is determined that any foreign income tax credits need to be recognized or it is more-likely-than-not our foreign income tax credits will not be realized, an adjustment to our provision for income taxes will be recognized at that time. As a result of the TCJA, a U.S. corporation is allowed a 100% dividend received deduction for earnings and profits received from a 10% owned foreign corporation. Therefore, a deferred income tax liability will be required only for withholding taxes that are incurred by our foreign subsidiaries. As a result, as of November 1, 2020, November 3, 2019, and May 3, 2020, we recorded a deferred income tax liability of $3.9 million, $3.2 million, and $3.4 million, respectively, for withholding taxes on undistributed earnings and profits from our foreign subsidiaries. Uncertain Income Tax Positions In accordance with ASC Topic 740, an unrecognized income tax benefit for an uncertain income tax position can be recognized in the first interim period during which the more-likely-than-not recognition threshold is met by the reporting period, or is effectively settled through examination, negotiation, or litigation, or the statute of limitations for the relevant taxing authority to examine and challenge the tax position has expired. If it is determined that any of the above conditions occur regarding our uncertain income tax positions, an adjustment to our unrecognized income tax benefits will be recorded at that time. As of November 1, 2020, we had a $1.4 million total gross unrecognized income tax benefit, of which $1.1 million and $380,000 were recorded to income taxes payable-long-term and noncurrent deferred income taxes, respectively, in the accompanying Consolidated Balance Sheets. As of November 3, 2019, we had a $914,000 total gross unrecognized income tax benefit of which the entire amount was recorded to income taxes payable-long-term in the accompanying Consolidated Balance Sheets. As of May 3, 2020, we had a $1.3 million total gross income tax benefit of which the entire amount was recorded to income taxes payable-long term in the accompanying Consolidated Balance Sheets. As of November 1, 2020, we had a $1.4 million total gross unrecognized income tax benefit, of which $1.1 million would favorably affect the income tax rate in future periods. As of November 3, 2019, the entire $914,000 total gross unrecognized income tax benefit would have favorably affected the income tax rate in future periods. As of May 3, 2020, the entire $1.3 million total gross unrecognized income would have favorably affected the income tax rate in future periods. Our gross unrecognized income tax benefit of $1.4 million relates to income tax positions for which significant change is currently not expected within the next year. This amount primarily relates to double taxation under applicable income tax treaties with foreign tax jurisdictions. |
Stock-Based Compensation |
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Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation |
16. Stock-Based Compensation Equity Incentive Plan Description On September 16, 2015, our shareholders approved an equity incentive plan titled the Culp, Inc. 2015 Equity Incentive Plan (the “2015 Plan”). The 2015 Plan authorizes the grant of stock options intended to qualify as incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance units, and other equity and cash related awards as determined by our Compensation Committee. An aggregate of 1,200,000 shares of common stock were authorized for issuance under the 2015 Plan, with certain sub-limits that would apply with respect to specific types of awards that may be issued as defined in the 2015 Plan. As of November 1, 2020, there were 548,729 shares available for future equity-based grants under our 2015 plan. Performance-Based Restricted Stock Units Senior Executives We grant performance-based restricted stock units to certain senior executives which could earn up to a certain number of shares of common stock if certain performance targets are met over a three-fiscal year performance period as defined in the related restricted stock unit agreements. The number of shares of common stock that are earned based on the performance targets that have been achieved may be adjusted based on a market-based total shareholder return component as defined in the related restricted stock unit agreements. Compensation cost for share-based awards is measured based on their fair market value on the date of grant. The fair market value per share was determined using the Monte Carlo simulation model for the market-based total shareholder return component and the closing price of our common stock for the performance-based component. There were no performance-based restricted stock units granted to certain senior executives during the six-months ended November 1, 2020. The following table provides assumptions used to determine the fair market value of the market-based total shareholder return component using the Monte Carlo simulation model on our outstanding performance-based restricted units granted to certain senior executives on July 18, 2019 and August 2, 2018:
Key Employees and a Non-Employee We grant performance-based restricted stock units which could earn up to a certain number of shares of common stock if certain performance targets are met over a three-fiscal year performance period as defined in the related restricted stock unit agreements. Our performance-based restricted stock units granted to key employees were measured based on the fair market value (the closing price of our common stock) on the date of grant. No market-based total shareholder return component was included in these awards. Our performance-based restricted stock units granted to a non-employee, which vested during the first quarter of fiscal 2020, were measured based on the fair market value (closing price of our common stock) on the date when the performance criteria were met. There were no performance-based restricted stock units granted to our key employees or any non-employees during the six-months ended November 1, 2020. Overall The following table summarizes information related to our grants of performance-based restricted stock units associated with certain senior executives and key employees that are currently unvested as of November 1, 2020:
The following table summarizes information related to our performance-based restricted stock units that vested during the six-month periods ending November 1, 2020 and November 3, 2019:
We recorded compensation expense of $89,000 and $275,000 within selling, general, and administrative expenses for the six-month periods ending November 1, 2020, and November 3, 2019, respectively. Compensation cost is recorded based on an assessment each reporting period to determine the probability of whether or not certain performance targets will be met as of the end of the vesting period. If certain performance goals are not expected to be achieved, compensation cost would not be recorded, and any previously recognized compensation cost would be reversed. As of November 1, 2020, the remaining unrecognized compensation cost related to our performance-based restricted stock units was $73,698, which is expected to be recognized over a weighted average vesting period of 1.5 years. As of November 1, 2020, the performance-based restricted stock units that were expected to vest had a fair value totaling $110,000. Time-Based Restricted Stock Units The following table summarizes information related to our grants of time-based restricted stock unit awards associated with certain senior executives and key members of management that are unvested as of November 1, 2020:
Overall We recorded compensation expense of $245,000 and $52,000 within selling, general, and administrative expenses associated with our time-based restricted stock unit awards for the six-month periods ending November 1, 2020, and November 3, 2019, respectively. As of November 1, 2020, the remaining unrecognized compensation cost related to our time-based restricted stock units was $1.8 million, which is expected to be recognized over a weighted average vesting period of 2.5 years. As of November 1, 2020, the time-based restricted stock units that are expected to vest had a fair value totaling $2.2 million. Common Stock Award We granted a total of 5,193 and 7,000 shares of common stock to our outside directors on October 1, 2020 and July 1, 2020, respectively. These shares of common stock vested immediately and were measured at their fair value on the date of grant. The fair value of these awards was $13.48 and $10.00 per share on October 1, 2020 and July 1, 2020, respectively, which represents the closing price of our common stock on the date of grant. We granted a total of 4,519 and 3,659 shares of common stock to our outside directors on October 1, 2019 and July 1, 2019, respectively. These shares of common stock vested immediately and were measured at their fair value on the date of grant. The fair value of these awards was $15.49 and $19.21 per share on October 1, 2019 and July 1, 2019, respectively, which represents the closing price of our common stock on the date of grant. We recorded $140,000 of compensation expense within selling, general, and administrative expenses for common stock awards to our outside directors for each of the six-month periods ending November 1, 2020, and November 3, 2019. |
Leases |
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Assets And Liabilities Lessee [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases |
17. Leases Overview We lease manufacturing facilities, office space, distribution centers, and equipment under operating lease arrangements. We determine if an arrangement is a lease at its inception if it conveys the right to control the use of identified property, plant, or equipment for a period of time in exchange for consideration. Operating leases with an initial term of twelve months or less are not recognized in our Consolidated Balance Sheets. For leases of more than twelve months, we recognize a right of use asset and lease liability on the commencement date of a lease arrangement based on the present value of lease payments over the lease term. Our operating leases have remaining lease terms of one to six years, with renewal options for additional periods ranging up to ten years. A lease term may include renewal options if it is reasonably certain that the option to renew a lease period will be exercised. A renewal option is considered reasonably certain to be exercised if there is a significant economic incentive, as defined in ASC Topic 842, to exercise the renewal option on the date a lease arrangement is commenced. Currently, renewal options are not included in the lease terms for any of our leases, as there is not a significant economic incentive for us to exercise any of our renewal options. Most of our leases do not provide an implicit interest rate, and as a result, we use our incremental borrowing rate, which approximates a collateralized rate, based on information available on the commencement date of a lease arrangement in determining the present value of lease our payments. Balance Sheet The right of use assets and lease liabilities associated with our operating leases as of November 1, 2020, November 3, 2019, and May 3, 2020, are as follows:
Supplemental Cash Flow Information
Operating lease expense for the three-months ended November 1, 2020, and November 3, 2019, was $696,000 and $706,000, respectively. Operating lease expense for each of the six-month periods ended November 1, 2020, and November 3, 2019, was $1.4 million. Short-term lease and variable lease expenses were immaterial for the three-months and six-months ended November 1, 2020, and November 3, 2019. Other Information Maturity of our operating lease liabilities for the remainder of fiscal 2021, the subsequent next four fiscal years, and thereafter follows:
As of November 1, 2020, the weighted average remaining lease term and discount rate for our operating leases follows:
As of November 3, 2019, the weighted average remaining lease term and discount rate for our operating leases follows:
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Commitments and Contingencies |
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Nov. 01, 2020 | |
Commitments And Contingencies Disclosure [Abstract] | |
Commitments and Contingencies |
18. Commitments and Contingencies Litigation The company is involved in legal proceedings and claims which have arisen in the ordinary course of business. Management has determined that it is not reasonably possible that these actions, when ultimately concluded and settled, will have a material adverse effect upon the financial position, results of operations, or cash flows of the company. Accounts Payable – Capital Expenditures As of November 1, 2020, November 3, 2019, and May 3, 2020, we had total amounts due regarding capital expenditures totaling $68,000, $402,000, and $107,000, respectively, which pertained to outstanding vendor invoices, none of which were financed. As of November 3, 2019, the total amount due of $402,000 consisted of $398,000 and $4,000 that were classified as (i) accounts payable – capital expenditures and (ii) within current liabilities – discontinued operation, respectively. These total outstanding amounts were required to be paid based on normal credit terms. Purchase Commitments – Capital Expenditures As of November 1, 2020, we had open purchase commitments to acquire equipment for our mattress fabrics segment totaling $5.0 million. |
Statutory Reserves |
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Nov. 01, 2020 | |
Text Block [Abstract] | |
Statutory Reserves |
19. Statutory Reserves Our subsidiary located in China was required to transfer 10% of its net income, as determined in accordance with the People’s Republic of China (PRC) accounting rules and regulations, to a statutory surplus reserve fund until such reserve balance reaches 50% of the company’s registered capital. As of November 1, 2020, the statutory surplus reserve fund represents the 50% registered capital limit, and therefore, our subsidiary in China is not required to transfer 10% of its net income in accordance with PRC accounting rules and regulations. The transfer to this reserve must be made before distributions of any dividend to shareholders. As of November 1, 2020, the company’s statutory surplus reserve was $4.3 million. The surplus reserve fund is non-distributable other than during liquidation and can be used to fund previous years’ losses, if any. The surplus reserve fund may be utilized for business expansion or converted into share capital by issuing new shares to existing shareholders in proportion to their shareholding or by increasing the par value of the shares currently held by them provided that the remaining reserve balance after such issue is not less than 25% of the registered capital. Our subsidiaries located in China can transfer funds to the parent company except for the statutory surplus reserve of $4.3 million to assist with debt repayment, capital expenditures, and other expenses of the company’s business. |
Common Stock Repurchase Program |
6 Months Ended |
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Nov. 01, 2020 | |
Text Block [Abstract] | |
Common Stock Repurchase Program |
20. Common Stock Repurchase Program In March 2020, our board of directors approved an authorization for us to acquire up to $5.0 million of our common stock. Under the common stock repurchase program, shares may be purchased from time to time in open market transactions, block trades, through plans established under the Securities Exchange Act Rule 10b5-1, or otherwise. The number of shares purchased, and the timing of such purchases will be based on working capital requirements, market and general business conditions, and other factors, including alternative investment opportunities. As part of our comprehensive response to the COVID-19 pandemic, we announced on April 3, 2020, that our board of directors temporarily suspended the share repurchase program given the ongoing economic disruption and uncertainty. Accordingly, we did not purchase any shares of our common stock during the six-month period ending November 1, 2020. Additionally, we did not purchase any shares of our common stock during the six-month period ending November 3, 2019. As of November 1, 2020, we had $5.0 million available for repurchases of our common stock. |
Dividend Program |
6 Months Ended |
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Nov. 01, 2020 | |
Text Block [Abstract] | |
Dividend Program |
21. Dividend Program On December 3, 2020, we announced that our board of directors approved a quarterly cash dividend of $0.11 per share. This payment will be made on January 18, 2021, to shareholders of record as of January 8, 2021. During the six-months ended November 1, 2020, dividend payments totaled $2.6 million, which represented quarterly dividend payments of $0.105 per share. During the six-months ended November 3, 2019, dividend payments totaled $2.5 million, which represented quarterly dividend payments of $0.10 per share. Our board of directors has sole authority to determine if and when we will declare future dividends and on what terms. Future dividend payments are subject to final determination by our board of directors and will depend on our earnings, capital requirements, financial condition, excess availability under our lines of credit, market and economic conditions, and other factors we consider relevant.
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Significant Accounting Policies (Policies) |
6 Months Ended |
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Nov. 01, 2020 | |
Accounting Policies [Abstract] | |
Recently Adopted and Issued Accounting Pronouncements |
Recently Adopted Accounting Pronouncements Current Expected Credit Losses (“CECL”) In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which requires entities to use a forward looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables. The FASB has subsequently issued updates to the standard to provide additional clarification on specific topics. Topic 326 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. As a result, we adopted the provisions of Topic 326 on May 4, 2020 and applied this guidance through the second quarter of fiscal 2021. The adoption of Topic 326 did not have an impact on our financial position, results of operations, or cash flows. See Notes 4 and 11 of our consolidated financial statements for further details of the adoption of CECL as of May 4, 2020 and our assessments and conclusions as of November 1, 2020. Recently Issued Accounting Pronouncements Income Taxes In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. We are required to apply this guidance in our fiscal 2022 interim and annual financial statements. Currently we do not expect this standard to affect our consolidated financial statements and related disclosures. There are no other new recent accounting pronouncements that are expected to have a material impact on our consolidated financial statements. |
Home Accessories Segment – Discontinued Operation (Tables) |
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Discontinued Operations And Disposal Groups [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Disposal of Discontinued Operation on Consolidated Balance Sheet |
The following is a summary of the assets and liabilities of the disposal group that are presented separately as a discontinued operation on the Consolidated Balance Sheet as of November 3, 2019.
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Summary of Net Loss from Discontinued Operation on Consolidated Consolidated Statements of Net Income |
The following is a summary of the major classes of financial statement line items constituting loss before income taxes from discontinued operation that are presented in the Consolidated Statements of Net Income for the three-month and six-month periods ending November 3, 2019:
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Summary of Net Income (Loss) from Continuing Operations, Net Loss from Discontinued Operation, and Net Income (Loss) Attributable to Common Shareholders and Noncontrolling Interest |
The following is a summary of net income (loss) from continuing operations, net loss from discontinued operation, and net income (loss) attributable to Culp, Inc. common shareholders and the noncontrolling interest associated with our discontinued operation for the three-month and six-month periods ending November 1, 2020, and November 3, 2019:
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Allowance for Doubtful Accounts (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Nov. 01, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of the Activity in the Allowance for Doubtful Accounts |
A summary of the activity in the allowance for doubtful accounts follows:
|
Revenue from Contracts with Customers (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Nov. 01, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue From Contract With Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Activity Associated with Deferred Revenue |
A summary of the activity associated with deferred revenue for the six-month periods ended November 1, 2020, and November 3, 2019, follows:
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Summary of Disaggregation of Revenue |
The following table presents our disaggregated revenue by segment, timing of revenue recognition, and product sales versus services rendered for the three-month period ending November 1, 2020:
The following table presents our disaggregated revenue by segment, timing of revenue recognition, and product sales versus services rendered for the six-month period ending November 1, 2020:
The following table presents our disaggregated revenue by segment, timing of revenue recognition, and product sales versus services rendered for the three-month period ending November 3, 2019:
The following table presents our disaggregated revenue by segment, timing of revenue recognition, and product sales versus services rendered for the six-month period ending November 3, 2019:
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Inventories (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Nov. 01, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Inventories |
A summary of inventories follows:
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Intangible Assets (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Nov. 01, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Intangible Assets |
A summary of intangible assets follows:
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Customer Relationships [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Change in Carrying Amount of Finite-Lived Intangible Assets |
A summary of the change in the carrying amount of our customer relationships follows:
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Non-Compete Agreement [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Change in Carrying Amount of Finite-Lived Intangible Assets |
A summary of the change in the carrying amount of our non-compete agreement follows:
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Investment in Unconsolidated Joint Venture (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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Nov. 01, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity Method Investments And Joint Ventures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Equity Method Investment |
The following table summarizes information on assets, liabilities, and members’ equity of our equity method investment in CLIH:
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Accrued Expenses (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Nov. 01, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Text Block [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Accrued Expenses |
A summary of accrued expenses follows:
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Fair Value (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Nov. 01, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Assets Measured at Fair Value on a Recurring Basis |
The following table presents information about assets measured at fair value on a recurring basis:
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Cash Flow Information (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||
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Nov. 01, 2020 | |||||||||||||||||||||||||||||||||||||||||
Supplemental Cash Flow Elements [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Schedule of Interest and Income Taxes Paid (Refunded) |
Interest and income taxes paid (refunded) are as follows:
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Net Income (Loss) from Continuing Operations Per Share (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Nov. 01, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Weighted Average Shares Used in the Computation of Basic and Diluted Net Income (Loss) from Continuing Operations Per Share |
Weighted average shares used in the computation of basic and diluted net income (loss) from continuing operations per share are as follows:
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Segment Information (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Nov. 01, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Operating Segments Information |
Statements of operations for our current operating segments are as follows:
Balance sheet information for our current operating segments follows:
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Income Taxes (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Nov. 01, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Allocation of Income Tax Expense |
Total income tax expense (benefit) for the six-month periods ending November 1, 2020, and November 3, 2019, were allocated as follows:
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Summary of Differences in Income Tax Expense at Federal Income Tax Rate and Effective Income Tax Rate |
The following schedule summarizes the principal differences between income tax expense from continuing operations at the U.S. federal income tax rate and the effective income tax rate from continuing operations reflected in the consolidated financial statements for the six-month periods ending November 1, 2020 and November 3, 2019:
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Summary of Valuation Allowances Against Net Deferred Income Taxes |
Based on our assessments as of November 1, 2020, November 1, 2019, and May 3, 2020, valuation allowances against our net deferred income taxes pertain to the following:
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Stock-Based Compensation (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Nov. 01, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Assumptions Used to Determine Fair Value of Performance Based Restricted Stock Units |
The following table provides assumptions used to determine the fair market value of the market-based total shareholder return component using the Monte Carlo simulation model on our outstanding performance-based restricted units granted to certain senior executives on July 18, 2019 and August 2, 2018:
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Performance-Based Restricted Stock Units [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Vested Restricted Stock Units |
The following table summarizes information related to our performance-based restricted stock units that vested during the six-month periods ending November 1, 2020 and November 3, 2019:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Executive officers and key employees [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Grants of Performance-Based Restricted Stock Units |
The following table summarizes information related to our grants of performance-based restricted stock units associated with certain senior executives and key employees that are currently unvested as of November 1, 2020:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Senior Executives and Management [Member] | Time-Based Restricted Stock Units [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Grants of Time-Based Restricted Stock Unit Awards |
The following table summarizes information related to our grants of time-based restricted stock unit awards associated with certain senior executives and key members of management that are unvested as of November 1, 2020:
|
Leases (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Nov. 01, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Assets And Liabilities Lessee [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of right of use assets and lease liabilities |
The right of use assets and lease liabilities associated with our operating leases as of November 1, 2020, November 3, 2019, and May 3, 2020, are as follows:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Cash Flow Information |
Supplemental Cash Flow Information
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases-Other Information |
Other Information Maturity of our operating lease liabilities for the remainder of fiscal 2021, the subsequent next four fiscal years, and thereafter follows:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of weighted average remaining lease term and discount rate |
As of November 1, 2020, the weighted average remaining lease term and discount rate for our operating leases follows:
As of November 3, 2019, the weighted average remaining lease term and discount rate for our operating leases follows:
|
Home Accessories Segment - Discontinued Operation - Narrative (Detail) - USD ($) |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Mar. 31, 2020 |
Nov. 01, 2020 |
Nov. 03, 2019 |
Nov. 01, 2020 |
Nov. 03, 2019 |
|
Discontinued Operations [Line Items] | |||||
Payment received from royalty agreement | $ 28,000 | $ 80,000 | |||
Leases, monthly payments | $ 1,232,000 | $ 1,408,000 | |||
eLuxury [Member] | |||||
Discontinued Operations [Line Items] | |||||
Net sales and cost of sales from continuing operations related to inventory shipments | $ 207,000 | 381,000 | |||
Unpaid lease payments guarantees percentage | 70.00% | ||||
Lease agreement expiry date | 2024-09 | ||||
Leases, monthly payments | $ 18,865 | ||||
eLuxury [Member] | |||||
Discontinued Operations [Line Items] | |||||
Amount of consideration received in sale of ownership at closing | $ 509,500 | ||||
Amount of settlement of borrowings payable by eLuxury under the agreement | 300,000 | ||||
Amount of loan, borrowers agreed to repay after closing of sale transaction | $ 1,000,000 | ||||
Disposal group loan amount closing period after sale transaction | 30 days | ||||
Outstanding trade accounts payable due from disposal group | $ 613,000 | ||||
Trade accounts payable, repayment period | 60 days | ||||
Net sales related to inventory shipments in supply agreement | $ 41,000 | $ 285,000 | |||
eLuxury [Member] | Discontinued Operations [Member] | |||||
Discontinued Operations [Line Items] | |||||
Net cash (used in) provided by operating activities discontinued operations | (2,200,000) | ||||
Net cash used in investing activities discontinued operation | (32,000) | ||||
Net cash (used in) provided by financing activities discontinued operations | $ 2,400,000 |
Home Accessories Segment - Discontinued Operation - Summary of Disposal of Discontinued Operation on Consolidated Balance Sheet (Detail) $ in Thousands |
Nov. 03, 2019
USD ($)
|
---|---|
ASSETS | |
total current assets - discontinued operation | $ 4,760 |
total noncurrent assets - discontinued operation | 22,950 |
LIABILITIES AND NET ASSETS | |
total current liabilities - discontinued operation | 1,907 |
total noncurrent liabilities - discontinued operation | 3,550 |
eLuxury [Member] | |
ASSETS | |
cash and cash equivalents | 228 |
accounts receivable | 632 |
inventories | 3,785 |
other current assets | 115 |
total current assets - discontinued operation | 4,760 |
property, plant, and equipment | 1,752 |
goodwill | 13,653 |
intangible asset | 6,549 |
right of use asset | 996 |
total noncurrent assets - discontinued operation | 22,950 |
total assets | 27,710 |
LIABILITIES AND NET ASSETS | |
accounts payable | 1,063 |
operating lease liability - current | 192 |
accrued expenses | 652 |
total current liabilities - discontinued operation | 1,907 |
loan payable - Culp Inc. | 1,800 |
subordinated loan payable - noncontrolling interest | 925 |
operating lease liability - long-term | 825 |
total noncurrent liabilities - discontinued operation | 3,550 |
total liabilities | 5,457 |
total net assets of discontinued operation | $ 22,253 |
Home Accessories Segment - Discontinued Operation - Summary of Net Loss from Discontinued Operation on Consolidated Consolidated Statements of Net Income (Detail) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Nov. 03, 2019 |
Nov. 03, 2019 |
|||
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items] | ||||
loss before income taxes from discontinued operation | $ (441) | $ (1,062) | ||
income tax benefit | 381 | 392 | ||
Net loss from discontinued operation | (60) | (670) | ||
Discontinued Operations [Member] | eLuxury [Member] | ||||
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items] | ||||
net sales | 3,276 | 7,578 | ||
cost of sales | (2,699) | (6,048) | ||
gross profit | 577 | 1,530 | ||
selling, general and administrative expenses | (1,003) | (2,565) | ||
interest expense | [1] | (27) | (47) | |
other income | 12 | 20 | ||
loss before income taxes from discontinued operation | (441) | (1,062) | ||
income tax benefit | 381 | 392 | ||
Net loss from discontinued operation | $ (60) | $ (670) | ||
|
Home Accessories Segment - Discontinued Operation - Summary of Net Income (Loss) from Continuing Operations, Net Loss from Discontinued Operation, and Net Income (Loss) Attributable to Common Shareholders and Noncontrolling Interest (Detail) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||||
---|---|---|---|---|---|---|---|
Nov. 01, 2020 |
Aug. 02, 2020 |
Nov. 03, 2019 |
Aug. 04, 2019 |
Nov. 01, 2020 |
Nov. 01, 2020 |
Nov. 03, 2019 |
|
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items] | |||||||
net (loss) income from continuing operations | $ 2,384 | $ 2,252 | $ (349) | $ 4,036 | |||
net loss from discontinued operation | (60) | (670) | |||||
Net (loss) income | 2,384 | $ (2,733) | 2,192 | $ 1,174 | $ (349) | 3,366 | |
Discontinued Operations [Member] | eLuxury [Member] | |||||||
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items] | |||||||
net (loss) income from continuing operations | 2,384 | 2,252 | $ (349) | 4,036 | |||
net (loss) income from continuing operations attributable to Culp, Inc. common shareholders | 2,384 | 2,252 | (349) | 4,036 | |||
net loss from discontinued operation | (60) | (670) | |||||
net loss from discontinued operation attributable to noncontrolling interest | 108 | 272 | |||||
net (loss) income from continuing operations attributable to Culp, Inc. common shareholders | 48 | (398) | |||||
Net (loss) income | 2,384 | 2,192 | (349) | 3,366 | |||
net loss from noncontrolling interest associated with a discontinued operation | 108 | 272 | |||||
net (loss) income attributable to Culp, Inc. common shareholders | $ 2,384 | $ 2,300 | $ (349) | $ 3,638 |
Allowance for Doubtful Accounts - Summary of the Activity in the Allowance for Doubtful Accounts (Detail) - Allowance for doubtful accounts [Member] - USD ($) $ in Thousands |
6 Months Ended | |
---|---|---|
Nov. 01, 2020 |
Nov. 03, 2019 |
|
Valuation and Qualifying Accounts Disclosure [Line Items] | ||
Beginning balance | $ 472 | $ 393 |
Provision for bad debts | 123 | (27) |
Ending balance | $ 595 | $ 366 |
Allowance for Doubtful Accounts - Narrative (Detail) - USD ($) $ in Thousands |
Nov. 01, 2020 |
May 03, 2020 |
Nov. 03, 2019 |
Apr. 28, 2019 |
---|---|---|---|---|
Allowance for doubtful accounts [Member] | ||||
Valuation and Qualifying Accounts Disclosure [Line Items] | ||||
Allowance for doubtful accounts | $ 595 | $ 472 | $ 366 | $ 393 |
Revenue from Contracts with Customers - Narrative (Detail) |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Nov. 01, 2020
USD ($)
|
Nov. 03, 2019
USD ($)
|
Nov. 01, 2020
USD ($)
Segment
|
Nov. 03, 2019
USD ($)
|
May 03, 2020
USD ($)
|
|
Contract Assets and Liabilities [Line Items] | |||||
Number of operating segments | Segment | 2 | ||||
Net sales | $ 76,851,000 | $ 69,550,000 | $ 141,315,000 | $ 140,269,000 | |
Contract assets recognized | $ 0 | 0 | $ 0 | 0 | $ 0 |
Minimum [Member] | |||||
Contract Assets and Liabilities [Line Items] | |||||
Contract with customers credit period | 15 days | ||||
Maximum [Member] | |||||
Contract Assets and Liabilities [Line Items] | |||||
Contract with customers credit period | 60 days | ||||
Home Accessories [Member] | Discontinued Operations [Member] | |||||
Contract Assets and Liabilities [Line Items] | |||||
Net sales | $ 3,300,000 | $ 7,600,000 |
Revenue from Contracts with Customers - Summary of the activity associated with deferred revenue (Detail) - USD ($) $ in Thousands |
6 Months Ended | ||||
---|---|---|---|---|---|
Nov. 01, 2020 |
Nov. 03, 2019 |
||||
Revenue From Contract With Customer [Abstract] | |||||
Beginning balance | $ 502 | [1] | $ 399 | ||
Revenue recognized on contract liabilities | (1,197) | (1,536) | |||
Payments received for services not yet rendered | 1,070 | 1,512 | |||
Ending balance | $ 375 | $ 375 | |||
|
Revenue from Contracts with Customers - Disaggregation of Revenue (Detail) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Nov. 01, 2020 |
Nov. 03, 2019 |
Nov. 01, 2020 |
Nov. 03, 2019 |
|
Disaggregation of Revenue [Line Items] | ||||
Total Net Sales | $ 76,851 | $ 69,550 | $ 141,315 | $ 140,269 |
Transferred at Point in Time [Member] | Product [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Total Net Sales | 74,696 | 66,630 | 136,860 | 135,317 |
Transferred over Time [Member] | Services [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Total Net Sales | 2,155 | 2,920 | 4,455 | 4,952 |
Mattress Fabrics [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Total Net Sales | 40,030 | 35,666 | 76,133 | 74,525 |
Mattress Fabrics [Member] | Transferred at Point in Time [Member] | Product [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Total Net Sales | 40,030 | 35,666 | 76,133 | 74,525 |
Upholstery Fabrics [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Total Net Sales | 36,821 | 33,884 | 65,182 | 65,744 |
Upholstery Fabrics [Member] | Transferred at Point in Time [Member] | Product [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Total Net Sales | 34,666 | 30,964 | 60,727 | 60,792 |
Upholstery Fabrics [Member] | Transferred over Time [Member] | Services [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Total Net Sales | $ 2,155 | $ 2,920 | $ 4,455 | $ 4,952 |
Inventories - Summary of Inventories (Detail) - USD ($) $ in Thousands |
Nov. 01, 2020 |
May 03, 2020 |
Nov. 03, 2019 |
|||
---|---|---|---|---|---|---|
Inventory Disclosure [Abstract] | ||||||
Raw materials | $ 8,594 | $ 7,823 | $ 6,872 | |||
Work-in-process | 3,056 | 1,958 | 2,973 | |||
Finished goods | 36,076 | 38,126 | 45,383 | |||
Inventories | $ 47,726 | $ 47,907 | $ 55,228 | [1] | ||
|
Inventories - Summary of Inventories (Parenthetical) (Detail) - USD ($) $ in Thousands |
Nov. 01, 2020 |
May 03, 2020 |
Nov. 03, 2019 |
||||||
---|---|---|---|---|---|---|---|---|---|
Inventory [Line Items] | |||||||||
Inventories | $ 47,726 | $ 47,907 | $ 55,228 | [1] | |||||
Inventories | $ 47,726 | $ 47,907 | [2] | 51,443 | |||||
Inventories [Member] | |||||||||
Inventory [Line Items] | |||||||||
Inventories | 51,400 | ||||||||
Current Assets - Discontinued Operation [Member] | |||||||||
Inventory [Line Items] | |||||||||
Inventories | $ 3,800 | ||||||||
|
Intangible Assets - Summary of Intangible Assets (Detail) - USD ($) |
Nov. 01, 2020 |
May 03, 2020 |
Nov. 03, 2019 |
Apr. 28, 2019 |
---|---|---|---|---|
Intangible Assets [Line Items] | ||||
Tradenames | $ 540,000 | $ 540,000 | $ 7,232,000 | |
Intangible assets | 3,192,000 | 3,380,000 | 10,260,000 | |
Customer Relationships [Member] | ||||
Intangible Assets [Line Items] | ||||
Finite-lived intangible assets, net | 2,087,000 | 2,238,000 | 2,388,000 | $ 2,538,000 |
Non-Compete Agreement [Member] | ||||
Intangible Assets [Line Items] | ||||
Finite-lived intangible assets, net | $ 565,000 | $ 602,000 | $ 640,000 | $ 678,000 |
Intangible Assets - Summary of Intangible Assets (Parenthetical) (Detail) - USD ($) $ in Thousands |
Nov. 01, 2020 |
May 03, 2020 |
Nov. 03, 2019 |
---|---|---|---|
Intangible Assets [Line Items] | |||
Intangible assets | $ 3,192 | $ 3,380 | $ 10,260 |
Continuing Operation [Member] | |||
Intangible Assets [Line Items] | |||
Intangible assets | 3,700 | ||
Discontinued Operation [Member] | |||
Intangible Assets [Line Items] | |||
Intangible assets | $ 6,600 |
Intangible Assets - Narrative (Detail) - USD ($) |
3 Months Ended | 6 Months Ended | |
---|---|---|---|
May 03, 2020 |
Nov. 01, 2020 |
Nov. 03, 2019 |
|
Intangible Assets [Line Items] | |||
Tradenames | $ 540,000 | $ 540,000 | $ 7,232,000 |
Gross carrying amount of customer relationships | 3,100,000 | 3,100,000 | 3,100,000 |
Gross carrying amount of non-compete agreement | 2,000,000.0 | 2,000,000.0 | 2,000,000.0 |
Customer Relationships [Member] | |||
Intangible Assets [Line Items] | |||
Accumulated amortization | 877,000 | 1,000,000.0 | 727,000 |
Remaining amortization expense for the fiscal year | 151,000 | ||
Remaining amortization expense for the first fiscal year | 301,000 | ||
Remaining amortization expense for the second fiscal year | 301,000 | ||
Remaining amortization expense for the third fiscal year | 301,000 | ||
Remaining amortization expense for the fourth fiscal year | 301,000 | ||
Remaining amortization expense for the fiscal year thereafter | $ 732,000 | ||
Weighted average remaining amortization period | 7 years 1 month 6 days | ||
Customer Relationships [Member] | Minimum [Member] | |||
Intangible Assets [Line Items] | |||
Useful life | 9 years | ||
Customer Relationships [Member] | Maximum [Member] | |||
Intangible Assets [Line Items] | |||
Useful life | 17 years | ||
Non-Compete Agreement [Member] | |||
Intangible Assets [Line Items] | |||
Useful life | 15 years | ||
Accumulated amortization | 1,400,000 | $ 1,500,000 | $ 1,400,000 |
Remaining amortization expense for the fiscal year | 37,000 | ||
Remaining amortization expense for the first fiscal year | 76,000 | ||
Remaining amortization expense for the second fiscal year | 76,000 | ||
Remaining amortization expense for the third fiscal year | 76,000 | ||
Remaining amortization expense for the fourth fiscal year | 76,000 | ||
Remaining amortization expense for the fiscal year thereafter | $ 224,000 | ||
Weighted average remaining amortization period | 7 years 6 months | ||
Read Window Products, LLC [Member] | |||
Intangible Assets [Line Items] | |||
Impairment charge | $ 143,000 |
Intangible Assets - Summary of Change in Carrying Amount of Finite-Lived Intangible Assets (Detail) - USD ($) $ in Thousands |
6 Months Ended | |
---|---|---|
Nov. 01, 2020 |
Nov. 03, 2019 |
|
Customer Relationships [Member] | ||
Finite Lived Intangible Assets [Line Items] | ||
Beginning balance | $ 2,238 | $ 2,538 |
Amortization expense | (151) | (150) |
Ending balance | 2,087 | 2,388 |
Non-Compete Agreement [Member] | ||
Finite Lived Intangible Assets [Line Items] | ||
Beginning balance | 602 | 678 |
Amortization expense | (37) | (38) |
Ending balance | $ 565 | $ 640 |
Investment in Unconsolidated Joint Venture - Narrative (Detail) |
1 Months Ended | 3 Months Ended | 6 Months Ended | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
May 31, 2020
USD ($)
|
Feb. 29, 2020
USD ($)
|
Nov. 01, 2020
USD ($)
ft²
|
Aug. 02, 2020
USD ($)
|
Nov. 03, 2019
USD ($)
|
Aug. 04, 2019
USD ($)
|
Nov. 01, 2020
USD ($)
ft²
|
Nov. 03, 2019
USD ($)
|
May 03, 2020
USD ($)
|
Dec. 20, 2019
USD ($)
ft²
|
||||
Schedule of Equity Method Investments [Line Items] | |||||||||||||
Net income (loss) | $ 2,384,000 | $ (2,733,000) | $ 2,192,000 | $ 1,174,000 | $ (349,000) | $ 3,366,000 | |||||||
Income (loss) from investment in unconsolidated joint venture | 100,000 | (16,000) | 167,000 | (3,000) | |||||||||
Investment in unconsolidated joint venture | $ 1,859,000 | 1,504,000 | $ 1,859,000 | 1,504,000 | $ 1,602,000 | [1] | |||||||
CLIH [Member] | |||||||||||||
Schedule of Equity Method Investments [Line Items] | |||||||||||||
Equity method investment, ownership percentage | 50.00% | 50.00% | |||||||||||
Area of additional plant facility | ft² | 80,000 | 80,000 | 40,000 | ||||||||||
Contractual obligation | $ 1,200,000 | ||||||||||||
Payments to acquire additional plant facility | $ 180,000 | $ 600,000 | $ 420,000 | $ 420,000 | |||||||||
Income (loss) from investment in unconsolidated joint venture | 167,000 | (3,000) | |||||||||||
Investment in unconsolidated joint venture | $ 1,900,000 | $ 1,500,000 | 1,900,000 | 1,500,000 | $ 1,600,000 | ||||||||
CLIH [Member] | Equity Method Investment Nonconsolidated Investee Or Group of Investees [Member] | |||||||||||||
Schedule of Equity Method Investments [Line Items] | |||||||||||||
Net income (loss) | $ 334,000 | $ (6,000) | |||||||||||
|
Investment in Unconsolidated Joint Venture - Summary of Equity Method Investment (Detail) - USD ($) $ in Thousands |
Nov. 01, 2020 |
Aug. 02, 2020 |
May 03, 2020 |
Nov. 03, 2019 |
Aug. 04, 2019 |
Apr. 28, 2019 |
[1] | |||
---|---|---|---|---|---|---|---|---|---|---|
Schedule of Equity Method Investments [Line Items] | ||||||||||
Total assets | $ 202,776 | $ 215,084 | [1] | $ 233,522 | ||||||
Total liabilities | 75,525 | 85,386 | [1] | 67,600 | ||||||
Total members’ equity | 127,251 | $ 125,869 | 129,698 | [1] | 165,922 | $ 164,336 | $ 164,247 | |||
CLIH [Member] | Equity Method Investment Nonconsolidated Investee Or Group of Investees [Member] | ||||||||||
Schedule of Equity Method Investments [Line Items] | ||||||||||
Total assets | 3,951 | 3,338 | 3,190 | |||||||
Total liabilities | 232 | 133 | 182 | |||||||
Total members’ equity | $ 3,719 | $ 3,205 | $ 3,008 | |||||||
|
Accrued Expenses - Summary of Accrued Expenses (Detail) - USD ($) $ in Thousands |
Nov. 01, 2020 |
May 03, 2020 |
Nov. 03, 2019 |
---|---|---|---|
Payables And Accruals [Abstract] | |||
Compensation, commissions and related benefits | $ 7,144 | $ 3,038 | $ 4,489 |
Interest | 9 | 3 | |
Other accrued expenses | 4,540 | 2,807 | 4,756 |
Accrued expenses | $ 11,684 | $ 5,854 | $ 9,248 |
Accrued Expenses - Narrative (Detail) - USD ($) |
Nov. 01, 2020 |
May 03, 2020 |
Nov. 03, 2019 |
|||
---|---|---|---|---|---|---|
Payables and Accruals [Line Items] | ||||||
Accrued expenses | $ 11,684,000 | $ 5,854,000 | $ 9,248,000 | |||
Current accrued expenses | $ 11,684,000 | 5,687,000 | [1] | 8,263,000 | ||
Long-term accrued expenses | $ 167,000 | [1] | 333,000 | |||
Current Liabilities - Discontinued Operation [Member] | ||||||
Payables and Accruals [Line Items] | ||||||
Accrued expenses | $ 652,000 | |||||
|
Lines of Credit and Paycheck Protection Program Loan - Narrative (Detail) |
1 Months Ended | 6 Months Ended | 12 Months Ended | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2020
USD ($)
|
Nov. 01, 2020
USD ($)
|
May 02, 2021
USD ($)
|
Nov. 01, 2020
CNY (¥)
|
May 03, 2020
USD ($)
|
Apr. 15, 2020
USD ($)
|
Nov. 03, 2019
USD ($)
|
|||
Line Of Credit Facility [Line Items] | ||||||||||
Outstanding amount | [1] | $ 29,750,000 | ||||||||
Repayments of debt | $ 30,772,000 | |||||||||
Paycheck Protection Program (PPP) loan amount | [1] | $ 7,606,000 | ||||||||
Paycheck Protection Program, CARES Act [Member] | ||||||||||
Line Of Credit Facility [Line Items] | ||||||||||
Paycheck Protection Program (PPP) loan amount | $ 7,600,000 | |||||||||
Revolving Credit Facility [Member] | United States [Member] | ||||||||||
Line Of Credit Facility [Line Items] | ||||||||||
Maximum borrowing capacity | $ 30,000,000 | |||||||||
Expiration date | Aug. 15, 2022 | |||||||||
Maximum amount of letters of credit | $ 1,000,000 | |||||||||
Applicable interest rate at end of period | 1.74% | 1.74% | 1.75% | 3.22% | ||||||
Interest rate description | Interest is charged at a rate as a variable spread over LIBOR based on our ratio of debt to EBITDA. | |||||||||
Reference rate on which the interest rate is based | LIBOR | |||||||||
Percentage of common stock in subsidiary pledge as collateral | 65.00% | |||||||||
Outstanding amount | $ 0 | $ 29,800,000 | $ 0 | |||||||
Additional borrowings amount | 0 | |||||||||
Repayments of debt | $ 29,800,000 | |||||||||
Letters of credit, outstanding amount | 250,000 | $ 250,000 | 250,000 | |||||||
Revolving Credit Facility [Member] | United States [Member] | Seventh Amendment to Credit Agreement [Member] | ||||||||||
Line Of Credit Facility [Line Items] | ||||||||||
Reduced percentage of allowable liens and other indebtedness | 5.00% | |||||||||
Revolving Credit Facility [Member] | United States [Member] | Seventh Amendment to Credit Agreement [Member] | Maximum [Member] | ||||||||||
Line Of Credit Facility [Line Items] | ||||||||||
Maximum allowable payment of dividends or stock repurchase | $ 10,000,000 | |||||||||
Revolving Credit Facility [Member] | United States [Member] | Seventh Amendment to Credit Agreement [Member] | Scenario Forecast [Member] | ||||||||||
Line Of Credit Facility [Line Items] | ||||||||||
Annual capital expenditures | $ 10,000,000 | |||||||||
Revolving Credit Facility [Member] | United States [Member] | Seventh Amendment to Credit Agreement [Member] | Price Level I [Member] | ||||||||||
Line Of Credit Facility [Line Items] | ||||||||||
Percentage of pricing matrix increased | 1.60% | |||||||||
Revolving Credit Facility [Member] | United States [Member] | Seventh Amendment to Credit Agreement [Member] | Price Level II [Member] | ||||||||||
Line Of Credit Facility [Line Items] | ||||||||||
Percentage of pricing matrix increased | 2.05% | |||||||||
Revolving Credit Facility [Member] | United States [Member] | Seventh Amendment to Credit Agreement [Member] | Price Level III [Member] | ||||||||||
Line Of Credit Facility [Line Items] | ||||||||||
Percentage of pricing matrix increased | 2.50% | |||||||||
Revolving Credit Facility [Member] | United States [Member] | Seventh Amendment to Credit Agreement [Member] | Price Level IV [Member] | ||||||||||
Line Of Credit Facility [Line Items] | ||||||||||
Percentage of pricing matrix increased | 3.00% | |||||||||
Revolving Credit Facility [Member] | United States [Member] | Letters of Credit [Member] | ||||||||||
Line Of Credit Facility [Line Items] | ||||||||||
Remaining letters of credit | 750,000 | |||||||||
Revolving credit agreements [Member] | China [Member] | Chinese Yuan Renminbi [Member] | ||||||||||
Line Of Credit Facility [Line Items] | ||||||||||
Maximum borrowing capacity | $ 6,000,000.0 | ¥ 40,000,000 | ||||||||
Expiration date | Dec. 04, 2020 | |||||||||
Applicable interest rate at end of period | 2.41% | |||||||||
Interest rate description | This agreement has an interest rate determined by the Chinese government at the time of borrowing and was set to expire on December 4, 2020. As of May 3, 2020, there were outstanding borrowings under this agreement totaling $1.0 million at an applicable interest rate of 2.41%. | |||||||||
Outstanding amount | $ 0 | $ 1,000,000.0 | $ 0 | |||||||
Additional borrowings amount | 0 | |||||||||
Repayments of debt | $ 1,000,000.0 | |||||||||
Revolving credit agreements [Member] | China [Member] | United States Dollar [Member] | ||||||||||
Line Of Credit Facility [Line Items] | ||||||||||
Maximum borrowing capacity | $ 2,000,000 | |||||||||
Expiration date | Jul. 07, 2021 | |||||||||
Interest rate description | This agreement has an interest rate determined by the Chinese government at the time of borrowing and is set to expire on July 7, 2021. As of November 1, 2020, there are no borrowings outstanding under this agreement. | |||||||||
Outstanding amount | $ 0 | |||||||||
|
Fair Value - Recurring Basis (Detail) - Fair Value, Measurements, Recurring [Member] - USD ($) $ in Thousands |
Nov. 01, 2020 |
May 03, 2020 |
Nov. 03, 2019 |
---|---|---|---|
Premier Money Market Fund [Member] | |||
Assets: | |||
Investments at fair value | $ 7,665 | $ 7,496 | $ 7,133 |
Other [Member] | |||
Assets: | |||
Investments at fair value | 67 | 56 | 88 |
Short Term Bond Funds [Member] | |||
Assets: | |||
Investments at fair value | 5,462 | 923 | |
Growth Allocation Fund [Member] | |||
Assets: | |||
Investments at fair value | 255 | 219 | 222 |
Moderate Allocation Fund [Member] | |||
Assets: | |||
Investments at fair value | 73 | 63 | 132 |
Quoted prices in active markets for identical assets - Level 1 [Member] | Premier Money Market Fund [Member] | |||
Assets: | |||
Investments at fair value | 7,665 | 7,496 | 7,133 |
Quoted prices in active markets for identical assets - Level 1 [Member] | Other [Member] | |||
Assets: | |||
Investments at fair value | 67 | 56 | 88 |
Quoted prices in active markets for identical assets - Level 1 [Member] | Short Term Bond Funds [Member] | |||
Assets: | |||
Investments at fair value | 5,462 | 923 | |
Quoted prices in active markets for identical assets - Level 1 [Member] | Growth Allocation Fund [Member] | |||
Assets: | |||
Investments at fair value | 255 | 219 | 222 |
Quoted prices in active markets for identical assets - Level 1 [Member] | Moderate Allocation Fund [Member] | |||
Assets: | |||
Investments at fair value | $ 73 | $ 63 | $ 132 |
Fair Value - Narrative (Detail) - USD ($) |
3 Months Ended | 6 Months Ended | ||||
---|---|---|---|---|---|---|
May 03, 2020 |
Nov. 01, 2020 |
Nov. 03, 2019 |
||||
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items] | ||||||
Short-term investments - available for sale | $ 923,000 | $ 5,500,000 | $ 0 | |||
Amortized cost of held-to-maturity investments | 6,300,000 | 5,800,000 | ||||
Fair value of held-to-maturity investments | 6,400,000 | 5,800,000 | 0 | |||
Long-term investments (Rabbi Trust) | 7,834,000 | [1] | 8,060,000 | 7,575,000 | ||
Tradenames | 540,000 | $ 540,000 | 7,232,000 | |||
Read Window Products, LLC [Member] | ||||||
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items] | ||||||
Impairment charge | 143,000 | |||||
Continuing Operation [Member] | ||||||
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items] | ||||||
Asset impairments - continuing operations | 13,600,000 | |||||
Continuing Operation [Member] | Read Window Products, LLC [Member] | ||||||
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items] | ||||||
Impairment charge | 143,000 | |||||
Tradenames | 540,000 | |||||
Discontinued Operations [Member] | eLuxury [Member] | Home Accessories [Member] | ||||||
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items] | ||||||
Impairment charge | 6,600,000 | |||||
Discontinued Operations [Member] | eLuxury [Member] | Home Accessories [Member] | Trade Names [Member] | ||||||
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items] | ||||||
Impairment charge | 4,200,000 | |||||
Discontinued Operations [Member] | eLuxury [Member] | Home Accessories [Member] | Goodwill [Member] | ||||||
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items] | ||||||
Impairment charge | 2,400,000 | |||||
Minimum [Member] | Investments (Held-To-Maturity) [Member] | ||||||
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items] | ||||||
Investment maturity period | 2 years | |||||
Maximum [Member] | ||||||
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items] | ||||||
Investment remaining maturity period | 2 years | |||||
Maximum [Member] | Investments (Held-To-Maturity) [Member] | ||||||
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items] | ||||||
Investment maturity period | 10 years | |||||
Short-term Investments [Member] | ||||||
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items] | ||||||
Accumulated unrealized gain (loss) on investments | (9,000) | $ (29,000) | ||||
Current Expected Credit Loses [Member] | ||||||
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items] | ||||||
Accumulated unrealized gain (loss) on investments | (29,000) | |||||
Long-term Investments (Rabbi Trust) [Member] | ||||||
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items] | ||||||
Accumulated unrealized gain (loss) on investments | $ 19,000 | $ 55,000 | $ 55,000 | |||
|
Cash Flow Information - Interest and Income Taxes Paid (Refunded) (Detail) - USD ($) $ in Thousands |
6 Months Ended | |||||
---|---|---|---|---|---|---|
Nov. 01, 2020 |
Nov. 03, 2019 |
|||||
Supplemental Cash Flow Elements [Abstract] | ||||||
Interest | $ 60 | $ 40 | ||||
Income taxes | [1],[2] | $ (556) | $ 2,782 | |||
|
Cash Flow Information - Interest and Income Taxes Paid (Refunded) (Parenthetical) (Detail) - USD ($) |
3 Months Ended | 6 Months Ended | |||||
---|---|---|---|---|---|---|---|
Nov. 01, 2020 |
Nov. 01, 2020 |
Nov. 03, 2019 |
|||||
Supplemental Cash Flow Elements [Line Items] | |||||||
AMT credit refunds | $ 1,500,000 | ||||||
Percentage of expected alternative minimum tax amount refundable in fiscal year 2021 | 50.00% | 50.00% | |||||
Percentage of expected alternative minimum tax amount refundable in fiscal year 2021 | 50.00% | 50.00% | |||||
AMT credit carryforward refundable balance amount received | $ 746,000 | ||||||
Percentage of AMT credits refundable under CARES Act | 100.00% | 100.00% | |||||
AMT credit carryforward remaining refundable balance amount received | $ 764,000 | ||||||
Net income tax refund | $ 556,000 | ||||||
Income taxes | [1],[2] | (556,000) | $ 2,782,000 | ||||
Income tax payment with foreign jurisdictions | 726,000 | 1,900,000 | |||||
Withholding tax payment | $ 838,000 | ||||||
U.S. Federal Transition Tax Payment [Member] | |||||||
Supplemental Cash Flow Elements [Line Items] | |||||||
Income taxes | $ 227,000 | ||||||
|
Net Income (Loss) from Continuing Operations Per Share - Schedule of Weighted Average Shares Used in the Computation of Basic and Diluted Net Income (Loss) from Continuing Operations Per Share (Detail) - shares shares in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Nov. 01, 2020 |
Nov. 03, 2019 |
Nov. 01, 2020 |
Nov. 03, 2019 |
|
Earnings Per Share [Abstract] | ||||
Weighted average common shares outstanding, basic | 12,298 | 12,408 | 12,293 | 12,403 |
Dilutive effect of stock-based compensation | 26 | 10 | ||
Weighted average common shares outstanding, diluted | 12,324 | 12,408 | 12,293 | 12,413 |
Net Income (Loss) from Continuing Operations Per Share - Narrative (Detail) - Common Stock Awards [Member] - shares |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Nov. 01, 2020 |
Nov. 03, 2019 |
Nov. 01, 2020 |
Nov. 03, 2019 |
|
Antidilutive securities due to decrease in stock price excluded from computation of earnings from continuing operations per share | 1,101 | 6,938 | 26,099 | 1,407 |
Unvested common stock excluded from the computation of dilutive net loss | 38,313 | |||
Shares excluded from computation of diluted net loss from continuing operations per share | 12,214 |
Segment Information - Narrative (Detail) |
6 Months Ended |
---|---|
Nov. 01, 2020
Segment
| |
Segment Reporting [Abstract] | |
Number of operating segments | 2 |
Description of changes in reporting goodwill and intangible assets in segment assets | Goodwill and intangible assets are not included in segment assets as these assets are not used by the Chief Operating Decision Maker to evaluate the respective segment’s operating performance, allocate resources to individual segments, or determine executive compensation. |
Segment Information - Statement of Operations for Operating Segments (Detail) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Nov. 01, 2020 |
Nov. 03, 2019 |
Nov. 01, 2020 |
Nov. 03, 2019 |
|
Segment Reporting Information [Line Items] | ||||
net sales | $ 76,851 | $ 69,550 | $ 141,315 | $ 140,269 |
gross profit from continuing operations | 14,261 | 13,526 | 24,162 | 25,938 |
selling, general, and administrative expenses | 9,743 | 9,117 | 17,761 | 18,266 |
total income from continuing operations | 4,518 | 4,409 | 6,401 | 7,707 |
restructuring credit | 35 | |||
interest expense | (21) | (51) | (21) | |
interest income | 59 | 258 | 117 | 518 |
other expense | (680) | (99) | (1,046) | (194) |
income before income taxes from continuing operations | 3,897 | 4,547 | 5,421 | 8,010 |
Mattress Fabrics [Member] | ||||
Segment Reporting Information [Line Items] | ||||
net sales | 40,030 | 35,666 | 76,133 | 74,525 |
Upholstery Fabrics [Member] | ||||
Segment Reporting Information [Line Items] | ||||
net sales | 36,821 | 33,884 | 65,182 | 65,744 |
Operating Segments [Member] | ||||
Segment Reporting Information [Line Items] | ||||
net sales | 76,851 | 69,550 | 141,315 | 140,269 |
gross profit from continuing operations | 14,261 | 13,526 | 24,162 | 25,938 |
selling, general, and administrative expenses | 9,743 | 9,117 | 17,761 | 18,266 |
total income from continuing operations | 6,401 | 7,672 | ||
Operating Segments [Member] | Mattress Fabrics [Member] | ||||
Segment Reporting Information [Line Items] | ||||
net sales | 40,030 | 35,666 | 76,133 | 74,525 |
gross profit from continuing operations | 7,584 | 6,247 | 12,191 | 11,938 |
selling, general, and administrative expenses | 3,202 | 2,953 | 5,964 | 6,025 |
total income from continuing operations | 4,382 | 3,294 | 6,227 | 5,913 |
Operating Segments [Member] | Upholstery Fabrics [Member] | ||||
Segment Reporting Information [Line Items] | ||||
net sales | 36,821 | 33,884 | 65,182 | 65,744 |
gross profit from continuing operations | 6,677 | 7,279 | 11,971 | 14,000 |
selling, general, and administrative expenses | 3,390 | 3,806 | 6,570 | 7,652 |
total income from continuing operations | 3,287 | 3,473 | 5,401 | 6,348 |
Unallocated Corporate [Member] | ||||
Segment Reporting Information [Line Items] | ||||
selling, general, and administrative expenses | 3,151 | 2,358 | 5,227 | 4,589 |
total income from continuing operations | $ (3,151) | $ (2,358) | $ (5,227) | $ (4,589) |
Segment Information - Balance Sheet Information by Operating Segments (Detail) - USD ($) $ in Thousands |
6 Months Ended | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Nov. 01, 2020 |
Nov. 03, 2019 |
May 03, 2020 |
||||||||||||||||||
Segment Reporting Information [Line Items] | ||||||||||||||||||||
Inventory | $ 47,726 | $ 51,443 | $ 47,907 | [1] | ||||||||||||||||
Cash and cash equivalents | 45,288 | 46,955 | 69,790 | [1] | ||||||||||||||||
Short-term investments - available for sale | 5,462 | 923 | [1] | |||||||||||||||||
Short-term investments - held-to-maturity | 5,005 | 4,271 | [1] | |||||||||||||||||
Current income taxes receivable | 776 | 1,585 | [1] | |||||||||||||||||
Current assets - discontinued operation | 4,760 | |||||||||||||||||||
Other current assets | 3,509 | 2,745 | 2,116 | [1] | ||||||||||||||||
Deferred income taxes | 645 | 511 | 793 | [1] | ||||||||||||||||
Property, plant and equipment | 41,599 | 45,221 | 43,147 | [1] | ||||||||||||||||
Right of use assets | 6,165 | 4,883 | 3,903 | [1] | ||||||||||||||||
Goodwill | 13,569 | |||||||||||||||||||
Intangible assets | 3,192 | 3,711 | 3,380 | [1] | ||||||||||||||||
Long-term investments - rabbi trust | 8,060 | 7,575 | 7,834 | [1] | ||||||||||||||||
Long-term investments - held-to-maturity | 759 | 2,076 | [1] | |||||||||||||||||
Noncurrent income taxes receivable | 733 | |||||||||||||||||||
Other assets | 547 | 496 | 664 | [1] | ||||||||||||||||
Noncurrent assets - discontinued operation | 22,950 | |||||||||||||||||||
Investment in unconsolidated joint venture | 1,859 | 1,504 | 1,602 | [1] | ||||||||||||||||
Total assets | 202,776 | 233,522 | 215,084 | [1] | ||||||||||||||||
Capital expenditures | [2] | 2,002 | 2,740 | |||||||||||||||||
Depreciation expense | 3,538 | 3,893 | ||||||||||||||||||
Operating Segments [Member] | ||||||||||||||||||||
Segment Reporting Information [Line Items] | ||||||||||||||||||||
Total assets | 127,832 | 124,290 | 118,912 | |||||||||||||||||
Depreciation expense | 3,538 | 3,893 | ||||||||||||||||||
Operating Segments [Member] | Mattress Fabrics [Member] | ||||||||||||||||||||
Segment Reporting Information [Line Items] | ||||||||||||||||||||
Accounts receivable | 15,914 | 11,224 | 12,212 | |||||||||||||||||
Inventory | 24,200 | 27,751 | 26,620 | |||||||||||||||||
Property, plant and equipment | [3] | 38,818 | 42,899 | 40,682 | ||||||||||||||||
Right of use assets | [4] | 1,186 | 170 | 362 | ||||||||||||||||
Investment in unconsolidated joint venture | 1,859 | 1,504 | 1,602 | |||||||||||||||||
Total assets | 81,977 | 83,548 | 81,478 | |||||||||||||||||
Capital expenditures | [2] | 1,710 | 2,212 | |||||||||||||||||
Depreciation expense | 3,132 | 3,321 | ||||||||||||||||||
Operating Segments [Member] | Upholstery Fabrics [Member] | ||||||||||||||||||||
Segment Reporting Information [Line Items] | ||||||||||||||||||||
Accounts receivable | 17,046 | 12,666 | 12,881 | |||||||||||||||||
Inventory | 23,526 | 23,692 | 21,287 | |||||||||||||||||
Property, plant and equipment | [5] | 2,014 | 1,774 | 1,633 | ||||||||||||||||
Right of use assets | [6] | 3,269 | 2,610 | 1,633 | ||||||||||||||||
Total assets | 45,855 | 40,742 | 37,434 | |||||||||||||||||
Capital expenditures | [2] | 181 | 229 | |||||||||||||||||
Depreciation expense | 406 | 382 | ||||||||||||||||||
Operating Segments [Member] | Discontinued Operation [Member] | ||||||||||||||||||||
Segment Reporting Information [Line Items] | ||||||||||||||||||||
Capital expenditures | [2] | 33 | ||||||||||||||||||
Depreciation expense | 190 | |||||||||||||||||||
Unallocated Corporate [Member] | ||||||||||||||||||||
Segment Reporting Information [Line Items] | ||||||||||||||||||||
Cash and cash equivalents | 45,288 | 46,955 | 69,790 | |||||||||||||||||
Short-term investments - available for sale | 5,462 | 923 | ||||||||||||||||||
Short-term investments - held-to-maturity | 5,005 | 4,271 | ||||||||||||||||||
Current income taxes receivable | 776 | 1,585 | ||||||||||||||||||
Current assets - discontinued operation | 4,760 | |||||||||||||||||||
Other current assets | 3,509 | 2,745 | 2,116 | |||||||||||||||||
Deferred income taxes | 645 | 511 | 793 | |||||||||||||||||
Property, plant and equipment | [7] | 767 | 548 | 832 | ||||||||||||||||
Right of use assets | [8] | 1,710 | 2,103 | 1,908 | ||||||||||||||||
Goodwill | 13,569 | |||||||||||||||||||
Intangible assets | 3,192 | 3,711 | 3,380 | |||||||||||||||||
Long-term investments - rabbi trust | 8,060 | 7,575 | 7,834 | |||||||||||||||||
Long-term investments - held-to-maturity | 759 | 2,076 | ||||||||||||||||||
Noncurrent income taxes receivable | 733 | |||||||||||||||||||
Other assets | 547 | 496 | 664 | |||||||||||||||||
Long-term note receivable affiliated with discontinued operation | 1,800 | |||||||||||||||||||
Noncurrent assets - discontinued operation | 22,950 | |||||||||||||||||||
Total assets | 202,776 | 233,522 | $ 215,084 | |||||||||||||||||
Capital expenditures | [2] | $ 111 | $ 266 | |||||||||||||||||
|
Segment Information - Balance Sheet Information by Operating Segments (Parenthetical) (Detail) - USD ($) |
Nov. 01, 2020 |
May 03, 2020 |
Nov. 03, 2019 |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Segment Reporting Information [Line Items] | ||||||||||||||||||
property, plant, and equipment | $ 41,599,000 | $ 43,147,000 | [1] | $ 45,221,000 | ||||||||||||||
Right of use assets | 6,165,000 | 3,903,000 | [1] | 4,883,000 | ||||||||||||||
Operating Segments [Member] | Mattress Fabrics [Member] | ||||||||||||||||||
Segment Reporting Information [Line Items] | ||||||||||||||||||
property, plant, and equipment | [2] | 38,818,000 | 40,682,000 | 42,899,000 | ||||||||||||||
Right of use assets | [3] | 1,186,000 | 362,000 | 170,000 | ||||||||||||||
Operating Segments [Member] | Upholstery Fabrics [Member] | ||||||||||||||||||
Segment Reporting Information [Line Items] | ||||||||||||||||||
property, plant, and equipment | [4] | 2,014,000 | 1,633,000 | 1,774,000 | ||||||||||||||
Right of use assets | [5] | 3,269,000 | 1,633,000 | 2,610,000 | ||||||||||||||
Operating Segments [Member] | United States [Member] | Mattress Fabrics [Member] | ||||||||||||||||||
Segment Reporting Information [Line Items] | ||||||||||||||||||
property, plant, and equipment | 26,500,000 | 27,700,000 | 30,500,000 | |||||||||||||||
Right of use assets | 696,000 | 362,000 | 170,000 | |||||||||||||||
Operating Segments [Member] | United States [Member] | Upholstery Fabrics [Member] | ||||||||||||||||||
Segment Reporting Information [Line Items] | ||||||||||||||||||
property, plant, and equipment | 1,100,000 | 1,200,000 | 1,300,000 | |||||||||||||||
Right of use assets | 561,000 | 857,000 | 1,100,000 | |||||||||||||||
Operating Segments [Member] | Canada [Member] | Mattress Fabrics [Member] | ||||||||||||||||||
Segment Reporting Information [Line Items] | ||||||||||||||||||
property, plant, and equipment | 12,300,000 | 13,000,000.0 | 12,400,000 | |||||||||||||||
Right of use assets | 490,000 | |||||||||||||||||
Operating Segments [Member] | China [Member] | Upholstery Fabrics [Member] | ||||||||||||||||||
Segment Reporting Information [Line Items] | ||||||||||||||||||
property, plant, and equipment | 904,000 | 471,000 | 500,000 | |||||||||||||||
Right of use assets | 2,700,000 | 776,000 | 1,500,000 | |||||||||||||||
Unallocated Corporate [Member] | ||||||||||||||||||
Segment Reporting Information [Line Items] | ||||||||||||||||||
property, plant, and equipment | [6] | 767,000 | 832,000 | 548,000 | ||||||||||||||
Right of use assets | [7] | 1,710,000 | 1,908,000 | 2,103,000 | ||||||||||||||
Unallocated Corporate [Member] | United States [Member] | ||||||||||||||||||
Segment Reporting Information [Line Items] | ||||||||||||||||||
property, plant, and equipment | 767,000 | 832,000 | 548,000 | |||||||||||||||
Right of use assets | $ 1,700,000 | $ 1,900,000 | $ 2,100,000 | |||||||||||||||
|
Income Taxes - Allocation of Income Tax Expense (Detail) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Nov. 01, 2020 |
Nov. 03, 2019 |
Nov. 01, 2020 |
Nov. 03, 2019 |
|
Income Tax Disclosure [Abstract] | ||||
Income from continuing operations | $ 1,613 | $ 2,279 | $ 5,937 | $ 3,971 |
Loss from discontinued operations | $ (381) | (392) | ||
Total income tax expense | $ 5,937 | $ 3,579 |
Income Taxes - Effective Income Tax Rate - Narrative (Detail) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Nov. 01, 2020 |
Nov. 03, 2019 |
Nov. 01, 2020 |
Nov. 03, 2019 |
|
Income Tax Disclosure [Abstract] | ||||
Income taxes | $ 1,613 | $ 2,279 | $ 5,937 | $ 3,971 |
Effective income tax rate | 109.50% | 49.60% |
Income Taxes - Differences Between Income Tax Expense from Continuing Operations at Federal Income Tax Rate and Effective Income Tax Rate (Detail) |
6 Months Ended | |
---|---|---|
Nov. 01, 2020 |
Nov. 03, 2019 |
|
Income Tax Disclosure [Abstract] | ||
U.S. federal income tax rate | 21.00% | 21.00% |
U.S. valuation allowance | 141.60% | |
U.S. income tax law change | (65.10%) | |
Global Intangible Low Taxed Income Tax ("GILTI") | 12.70% | |
Withholding taxes associated with foreign jurisdictions | 8.40% | 6.10% |
Foreign income tax rate differential | 6.60% | 3.50% |
Tax effects of foreign exchange rate (losses) gains | (4.00%) | 2.30% |
Other | 1.00% | 4.00% |
Effective income tax rate | 109.50% | 49.60% |
Income Taxes - U.S. Tax Law Change - Narrative (Detail) - GILTI [Member] - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | 12 Months Ended | |
---|---|---|---|---|
Aug. 02, 2020 |
Nov. 01, 2020 |
May 03, 2020 |
Apr. 28, 2019 |
|
Income Taxes [Line Items] | ||||
Income tax charge of during period | $ 1.9 | $ 2.1 | ||
Non-cash income tax benefit | $ 3.5 | $ 3.5 |
Income Taxes - Valuation Allowance - Narrative (Detail) - USD ($) |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Nov. 01, 2020 |
Aug. 02, 2020 |
Nov. 03, 2019 |
Nov. 01, 2020 |
Nov. 03, 2019 |
|
Income Taxes [Line Items] | |||||
Income tax charge | $ 1,613,000 | $ 2,279,000 | $ 5,937,000 | $ 3,971,000 | |
Valuation Allowance, Tax Credit Carryforward [Member] | |||||
Income Taxes [Line Items] | |||||
Income tax charge | 713,000 | ||||
COVID-19 [Member] | GILTI [Member] | |||||
Income Taxes [Line Items] | |||||
Non-cash income tax charges | $ 7,000,000.0 | $ 7,000,000.0 |
Income Taxes - Summary of Valuation Allowances Against Net Deferred Income Taxes (Detail) - USD ($) $ in Thousands |
Nov. 01, 2020 |
May 03, 2020 |
Nov. 03, 2019 |
---|---|---|---|
Valuation Allowance [Line Items] | |||
Valuation allowance | $ 10,824 | $ 3,148 | $ 711 |
Capital Loss Carry Forwards and Credits [Member] | |||
Valuation Allowance [Line Items] | |||
Valuation allowance | 2,281 | 2,281 | |
Federal and State [Member] | Deferred Income Tax Assets [Member] | |||
Valuation Allowance [Line Items] | |||
Valuation allowance | $ 8,543 | $ 867 | $ 711 |
Income Taxes - Undistributed Earnings - Narrative (Detail) - USD ($) $ in Millions |
6 Months Ended | 12 Months Ended | |
---|---|---|---|
Nov. 01, 2020 |
Nov. 03, 2019 |
May 03, 2020 |
|
Income Tax Disclosure [Abstract] | |||
Dividends received deduction percentage for earnings and profits received from foreign corporation | 100.00% | 100.00% | 100.00% |
Dividends received deduction, foreign corporation ownership percentage | 10.00% | 10.00% | 10.00% |
Deferred tax liability, undistributed earnings from foreign subsidiaries | $ 3.9 | $ 3.2 | $ 3.4 |
Income Taxes - Uncertain Income Tax Positions - Narrative (Detail) - USD ($) |
Nov. 01, 2020 |
May 03, 2020 |
Nov. 03, 2019 |
---|---|---|---|
Income Taxes [Line Items] | |||
Unrecognized tax benefits | $ 1,400,000 | ||
Unrecognized tax benefits that would favorably impact effective income tax rate if recognized | 1,100,000 | $ 1,300,000 | $ 914,000 |
Non-current Deferred Income Taxes [Member] | |||
Income Taxes [Line Items] | |||
Unrecognized tax benefits | 380,000 | ||
Income Taxes Payable - Long-Term [Member] | |||
Income Taxes [Line Items] | |||
Unrecognized tax benefits | $ 1,100,000 | $ 1,300,000 | $ 914,000 |
Stock-Based Compensation - Narrative (Detail) - USD ($) |
6 Months Ended | ||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Oct. 01, 2020 |
Jul. 01, 2020 |
Oct. 01, 2019 |
Jul. 18, 2019 |
Jul. 01, 2019 |
Aug. 02, 2018 |
Nov. 01, 2020 |
Nov. 03, 2019 |
Sep. 16, 2015 |
|||||||||||||||
Performance-Based Restricted Stock Units [Member] | |||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||||||||||
Fair value of units expected to vest | $ 110,000 | ||||||||||||||||||||||
Remaining unrecognized compensation cost | $ 73,698 | ||||||||||||||||||||||
Weighted average period over which unrecognized compensation cost is expected to be recognized | 1 year 6 months | ||||||||||||||||||||||
Performance-Based Restricted Stock Units [Member] | Selling, General and Administrative Expenses [Member] | |||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||||||||||
Share-based compensation expense | $ 89,000 | $ 275,000 | |||||||||||||||||||||
Performance-Based Restricted Stock Units [Member] | Senior Executives [Member] | |||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||||||||||
Number of shares/units granted | 93,653 | [1],[2] | 86,599 | [1],[2] | 0 | ||||||||||||||||||
Price Per Share | [2] | $ 19.04 | [3] | $ 18.51 | [4] | ||||||||||||||||||
Performance-Based Restricted Stock Units [Member] | Key Employees [Member] | |||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||||||||||
Number of shares/units granted | 29,227 | [1],[5] | 47,800 | [1],[5] | 0 | ||||||||||||||||||
Price Per Share | [5],[6] | $ 18.49 | $ 24.35 | ||||||||||||||||||||
Performance-Based Restricted Stock Units [Member] | Non-employee [Member] | |||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||||||||||
Number of shares/units granted | 0 | ||||||||||||||||||||||
Time-Based Restricted Stock Units [Member] | |||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||||||||||
Fair value of units expected to vest | $ 2,200,000 | ||||||||||||||||||||||
Remaining unrecognized compensation cost | $ 1,800,000 | ||||||||||||||||||||||
Weighted average period over which unrecognized compensation cost is expected to be recognized | 2 years 6 months | ||||||||||||||||||||||
Time-Based Restricted Stock Units [Member] | Selling, General and Administrative Expenses [Member] | |||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||||||||||
Share-based compensation expense | $ 245,000 | 52,000 | |||||||||||||||||||||
Common Stock Awards [Member] | Selling, General and Administrative Expenses [Member] | |||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||||||||||
Share-based compensation expense | $ 140,000 | $ 140,000 | |||||||||||||||||||||
Common Stock Awards [Member] | Outside Directors [Member] | Immediate Vesting [Member] | |||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||||||||||
Number of shares/units granted | 5,193 | 7,000 | 4,519 | 3,659 | |||||||||||||||||||
Price Per Share | $ 13.48 | $ 10.00 | $ 15.49 | $ 19.21 | |||||||||||||||||||
2015 Equity Incentive Plan [Member] | |||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||||||||||
Number of common stock authorized for issuance | 1,200,000 | ||||||||||||||||||||||
Number of shares available for future equity based grants | 548,729 | ||||||||||||||||||||||
|
Stock-Based Compensation - Summary of Assumptions Used to Determine Fair Value of Performance Based Restricted Stock Units (Detail) - Performance-Based Restricted Stock Units [Member] - Senior Executives [Member] - $ / shares |
Jul. 18, 2019 |
Aug. 02, 2018 |
||||
---|---|---|---|---|---|---|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Closing price of our common stock | $ 18.49 | $ 24.35 | ||||
Expected volatility of our common stock | 30.00% | 33.50% | ||||
Expected volatility of peer companies | [1],[2] | 16.00% | ||||
Risk-free interest rate | 1.73% | 2.74% | ||||
Dividend yield | 2.10% | 1.35% | ||||
Correlation coefficient of peer companies | [1],[2] | 0.47% | ||||
Minimum [Member] | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Expected volatility of peer companies | [1],[2] | 29.90% | ||||
Correlation coefficient of peer companies | [1],[2] | 0.00% | ||||
Maximum [Member] | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Expected volatility of peer companies | [1],[2] | 82.30% | ||||
Correlation coefficient of peer companies | [1],[2] | 0.43% | ||||
|
Stock-Based Compensation - Summary of Grants of Performance-Based Restricted Stock Units Associated with Senior Executives and Key Employees (Detail) - Performance-Based Restricted Stock Units [Member] - $ / shares |
6 Months Ended | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jul. 18, 2019 |
Aug. 02, 2018 |
Nov. 01, 2020 |
|||||||||||||||||
Senior Executives [Member] | |||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||||||
Performance-Based Restricted Stock Units Awarded | 93,653 | [1],[2] | 86,599 | [1],[2] | 0 | ||||||||||||||
Restricted Stock Units Expected to Vest | [2],[3] | 1,725 | 3,509 | ||||||||||||||||
Price Per Share | [2] | $ 19.04 | [4] | $ 18.51 | [5] | ||||||||||||||
Vesting Period | [2] | 3 years | 3 years | ||||||||||||||||
Key Employees [Member] | |||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||||||
Performance-Based Restricted Stock Units Awarded | 29,227 | [1],[6] | 47,800 | [1],[6] | 0 | ||||||||||||||
Restricted Stock Units Expected to Vest | [3],[6] | 1,489 | 2,101 | ||||||||||||||||
Price Per Share | [6],[7] | $ 18.49 | $ 24.35 | ||||||||||||||||
Vesting Period | [6] | 3 years | 3 years | ||||||||||||||||
|
Stock-Based Compensation - Summary of Grants of Performance-Based Restricted Stock Units Associated with Senior Executives and Key Employees (Parenthetical) (Detail) - Performance-Based Restricted Stock Units [Member] - Senior Executives [Member] - $ / shares |
Jul. 18, 2019 |
Aug. 02, 2018 |
---|---|---|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Fair value adjustment to closing price of common stock, percentage | 1.03% | 0.76% |
Fair value adjustment to closing price of common stock, per share | $ 0.55 | $ (5.84) |
Closing price of common stock | $ 18.49 | $ 24.35 |
Stock-Based Compensation - Summary of Performance-Based Restricted Stock Units Vested (Detail) - Performance-Based Restricted Stock Units [Member] - USD ($) $ / shares in Units, $ in Thousands |
6 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
Nov. 01, 2020 |
Nov. 03, 2019 |
|||||||||
Senior Executives and Key Employees [Member] | ||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||
Performance-Based Restricted Stock Units Vested | [1] | 3,277 | ||||||||
Fair Value | [1],[2] | $ 33 | ||||||||
Price Per Share | [1],[3] | $ 9.96 | ||||||||
Senior Executives and Key Employees [Member] | ||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||
Performance-Based Restricted Stock Units Vested | [1] | 3,710 | ||||||||
Fair Value | [1],[2] | $ 37 | ||||||||
Price Per Share | [1],[3] | $ 9.96 | ||||||||
Key Employees and Senior Executives [Member] | ||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||
Performance-Based Restricted Stock Units Vested | [1] | 11,351 | ||||||||
Fair Value | [1],[2] | $ 197 | ||||||||
Price Per Share | [1],[3] | $ 17.36 | ||||||||
Non-employee [Member] | ||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||
Performance-Based Restricted Stock Units Vested | [4] | 4,961 | ||||||||
Fair Value | [2],[4] | $ 86 | ||||||||
Price Per Share | [3],[4] | $ 17.36 | ||||||||
|
Stock-Based Compensation - Summary of Grants of Time-Based Restricted Stock Unit Awards Associated with Key Member of Management (Detail) - Time-Based Restricted Stock Units [Member] - Senior Executives and Management [Member] - $ / shares |
Aug. 06, 2020 |
Jul. 18, 2019 |
Aug. 02, 2018 |
||
---|---|---|---|---|---|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Time-Based Restricted Stock Units Awarded | 129,896 | 34,399 | 10,000 | ||
Price Per Share | [1] | $ 11.01 | $ 18.49 | $ 24.35 | |
Vesting Period | 3 years | 3 years | 5 years | ||
|
Leases - Narrative (Detail) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Nov. 01, 2020 |
Nov. 03, 2019 |
Nov. 01, 2020 |
Nov. 03, 2019 |
|
Lessee, Operating Lease, Option to Extend | renewal options for additional periods ranging up to ten years | |||
Operating Lease Expenses | $ 696,000 | $ 706,000 | $ 1,400,000 | $ 1,400,000 |
Minimum [Member] | ||||
Operating Lease Remaining Lease Terms | 1 year | |||
Maximum [Member] | ||||
Operating Lease Remaining Lease Terms | 6 years |
Leases - Lessee Operating Lease Right of Use Assets and Liabilities (Detail) - USD ($) $ in Thousands |
Nov. 01, 2020 |
May 03, 2020 |
Nov. 03, 2019 |
[1] | ||
---|---|---|---|---|---|---|
Assets And Liabilities Lessee [Abstract] | ||||||
Right of use assets | $ 6,165 | $ 3,903 | $ 5,879 | |||
Operating lease liability - current | 2,316 | 1,805 | 2,282 | |||
Operating lease liability – noncurrent | $ 4,008 | $ 2,016 | $ 3,439 | |||
|
Leases - Lessee Operating Lease Right of Use Assets and Liabilities (Parenthetical) (Detail) - USD ($) |
Nov. 01, 2020 |
May 03, 2020 |
Nov. 03, 2019 |
||||||
---|---|---|---|---|---|---|---|---|---|
Lessee Lease Description [Line Items] | |||||||||
Right of use assets | $ 6,165,000 | $ 3,903,000 | $ 5,879,000 | [1] | |||||
Right of use asset | 6,165,000 | 3,903,000 | [2] | 4,883,000 | |||||
Noncurrent assets - discontinued operation | 22,950,000 | ||||||||
Operating lease liabilities | 6,324,000 | 5,700,000 | |||||||
Operating lease liability - current | 2,316,000 | 1,805,000 | [2] | 2,090,000 | |||||
Current liabilities - Discontinued operation | 1,907,000 | ||||||||
Operating lease liability - noncurrent | $ 4,008,000 | $ 2,016,000 | [2] | 2,614,000 | |||||
Noncurrent liabilities - discontinued operation | 3,550,000 | ||||||||
Right of Use Assets [Member] | |||||||||
Lessee Lease Description [Line Items] | |||||||||
Right of use asset | 4,900,000 | ||||||||
Noncurrent Assets Discontinued Operation [Member] | |||||||||
Lessee Lease Description [Line Items] | |||||||||
Noncurrent assets - discontinued operation | 1,000,000.0 | ||||||||
Operating Lease Liability Current [Member] | |||||||||
Lessee Lease Description [Line Items] | |||||||||
Operating lease liability - current | 2,100,000 | ||||||||
Current Liabilities - Discontinued Operation [Member] | |||||||||
Lessee Lease Description [Line Items] | |||||||||
Current liabilities - Discontinued operation | 192,000 | ||||||||
Operating Lease Liability Noncurrent [Member] | |||||||||
Lessee Lease Description [Line Items] | |||||||||
Operating lease liability - noncurrent | 2,600,000 | ||||||||
Noncurrent Liabilities Discontinued Operation [Member] | |||||||||
Lessee Lease Description [Line Items] | |||||||||
Noncurrent liabilities - discontinued operation | $ 825,000 | ||||||||
|
Leases - Operating Leases of Lessee Disclosure (Details) - USD ($) $ in Thousands |
6 Months Ended | |
---|---|---|
Nov. 01, 2020 |
Nov. 03, 2019 |
|
Lessee Disclosure [Abstract] | ||
Operating lease liability payments | $ 1,232 | $ 1,408 |
Right of use assets exchanged for lease liabilities | $ 3,618 | $ 22 |
Leases - Lessee Operating Lease Liability Maturity (Details) - USD ($) $ in Thousands |
Nov. 01, 2020 |
Nov. 03, 2019 |
---|---|---|
Lessee Disclosure [Abstract] | ||
2021 | $ 1,244 | |
2022 | 1,955 | |
2023 | 1,536 | |
2024 | 1,172 | |
2025 | 679 | |
Total | 6,586 | |
Less: interest | (262) | |
Present value of lease liabilities | $ 6,324 | $ 5,700 |
Leases - Weighted Average Lease Term and Discount Rate (Detail) |
Nov. 01, 2020 |
Nov. 03, 2019 |
---|---|---|
Lessee Disclosure [Abstract] | ||
Weighted average lease term | 3 years 3 months 18 days | 3 years 4 months 24 days |
Weighted average discount rate | 2.51% | 3.82% |
Commitments and Contingencies - Narrative (Detail) - USD ($) |
Nov. 01, 2020 |
May 03, 2020 |
Nov. 03, 2019 |
|||
---|---|---|---|---|---|---|
Commitments and Contingencies Disclosure [Line Items] | ||||||
Accounts payable for capital expenditures, net | $ 68,000 | $ 107,000 | $ 402,000 | |||
Accounts payable for capital expenditures | 68,000 | $ 107,000 | [1] | 398,000 | ||
Mattress Fabrics [Member] | Capital Addition Purchase Commitments [Member] | ||||||
Commitments and Contingencies Disclosure [Line Items] | ||||||
Open purchase commitments for equipment | $ 5,000,000.0 | |||||
Accounts Payable – Capital Expenditures [Member] | ||||||
Commitments and Contingencies Disclosure [Line Items] | ||||||
Accounts payable for capital expenditures | 398,000 | |||||
Current Liabilities - Discontinued Operation [Member] | ||||||
Commitments and Contingencies Disclosure [Line Items] | ||||||
Accounts payable for capital expenditures | $ 4,000 | |||||
|
Statutory Reserves - Narrative (Detail) - Subsidiaries [Member] - China [Member] $ in Millions |
6 Months Ended |
---|---|
Nov. 01, 2020
USD ($)
| |
Statutory Reserves [Line Items] | |
Percentage of net income required to be transferred to a statutory surplus reserve fund | 10.00% |
Maximum required percentage of statutory surplus reserve fund to registered capital | 50.00% |
Percentage of statutory surplus reserve fund to registered capital | 50.00% |
Statutory surplus reserve fund balance | $ 4.3 |
Minimum threshold percentage for statutory surplus reserve fund as percentage of registered capital, below which certain capital transactions are prohibited | 25.00% |
Common Stock Repurchase Program (Detail) - Common Stock [Member] - USD ($) |
6 Months Ended | ||
---|---|---|---|
Nov. 01, 2020 |
Nov. 03, 2019 |
Mar. 31, 2020 |
|
Stockholders Equity Note [Line Items] | |||
Common stock repurchased | 0 | 0 | |
Remaining authorized repurchase amount | $ 5,000,000.0 | ||
Stock Repurchase Program March 2020 [Member] | |||
Stockholders Equity Note [Line Items] | |||
Authorization amount for repurchase of common stock | $ 5,000,000.0 |
Dividend Program - Narrative (Detail) - USD ($) $ / shares in Units, $ in Thousands |
6 Months Ended | ||
---|---|---|---|
Dec. 03, 2020 |
Nov. 01, 2020 |
Nov. 03, 2019 |
|
Dividends [Line Items] | |||
Cash dividends paid | $ 2,583 | $ 2,482 | |
Quarterly Dividend [Member] | |||
Dividends [Line Items] | |||
Cash dividends paid | $ 2,600 | $ 2,500 | |
Cash dividend payment, per share | $ 0.105 | $ 0.10 | |
Subsequent Event [Member] | Quarterly Dividend [Member] | |||
Dividends [Line Items] | |||
Cash dividend declared, per share | $ 0.11 | ||
Date of payment to shareholders entitled to dividends | Jan. 18, 2021 | ||
Date of record of shareholders entitled to dividends | Jan. 08, 2021 |
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